Loss

Definition

Loss is the excess of expenses over revenues for a specific period, indicating that a company has spent more than it has earned. It is reported on the income statement and negatively impacts the company's financial health.

5 Must Know Facts For Your Next Test

1. A loss appears at the bottom of the income statement and reduces retained earnings.
2. Recurring losses can indicate underlying operational inefficiencies or poor management.
3. Non-operating losses, such as those from discontinued operations, are separated from operating losses for clarity.
4. Losses can be carried forward to offset future taxable income under certain tax regulations.
5. Firms experiencing continuous losses may need to adjust their business strategies or consider restructuring.

Review Questions

• Where is a loss reported on financial statements?
• What might recurring losses suggest about a company's operations?
• How are non-operating losses treated differently on an income statement?

Related terms

Net Income: The total profit of a company after all expenses, taxes, and costs have been subtracted from total revenue.

Gross Profit: Revenue minus cost of goods sold, excluding other expenses such as operating costs and taxes.

Operating Expenses: Costs that are necessary for a company to conduct its primary business activities, such as wages, rent, and utilities.