Insufficient Funds and Decreased Net Value: The Impact of Excess Expense

A

The term "expense" refers to the costs incurred by an individual or a business for the purpose of generating revenue or achieving a specific goal. On the other hand, "income" refers to the revenue earned by an individual or a business for the services rendered or goods sold. When the expenses exceed the income, it creates a financial situation known as a deficit.

Answer A, "Cash deficit," is the correct answer to the question. It refers to a situation where a business or an individual is unable to meet their financial obligations because they have more expenses than income. This results in insufficient funds to cover their expenses, which can lead to decreased net worth.

Answer B, "Limited Liability," is a legal term that refers to the liability of an individual or a business. It means that the owner's personal assets are not liable for the debts or obligations of the business.

Answer C, "Cash basis," refers to an accounting method where revenue and expenses are recognized when cash is received or paid. It is different from accrual basis accounting, where revenue and expenses are recognized when they are earned or incurred, regardless of whether cash has been received or paid.

Answer D, "Net worth," refers to the total value of an individual's or a business's assets minus its liabilities. It is a measure of the financial health of an individual or a business and is often used to determine creditworthiness.

In summary, a cash deficit occurs when expenses exceed income, resulting in insufficient funds and decreased net worth. Limited liability is a legal term that refers to the liability of an individual or a business. Cash basis refers to an accounting method, while net worth is a measure of an individual's or a business's financial health.