The correct answer is C. Expenses.
Net income is a company’s total revenue minus its total expenses. Revenue is the money that a company brings in from its sales of goods or services. Expenses are the costs that a company incurs in order to generate that revenue. These costs can include things like salaries, rent, and utilities.
Gains and losses are not included in the calculation of net income. Gains are increases in a company’s assets that are not the result of revenue. Losses are decreases in a company’s assets that are not the result of expenses.
Capital expenditure is the money that a company spends on long-term assets, such as buildings and equipment. Capital expenditure is not included in the calculation of net income because it is not a cost of doing business.
Here is a more detailed explanation of each option:
- Option A: Gains. Gains are increases in a company’s assets that are not the result of revenue. For example, if a company sells a piece of equipment for more than it paid for it, the difference is a gain. Gains are not included in the calculation of net income because they are not a cost of doing business.
- Option B: Depreciation. Depreciation is the accounting process of allocating the cost of a long-term asset over its useful life. For example, if a company buys a machine for $100,000 and expects it to last for 10 years, it will depreciate the machine $10,000 per year. Depreciation is not included in the calculation of net income because it is not a cash expense.
- Option C: Expenses. Expenses are the costs that a company incurs in order to generate revenue. These costs can include things like salaries, rent, and utilities. Expenses are included in the calculation of net income because they are a cost of doing business.
- Option D: Capital expenditure. Capital expenditure is the money that a company spends on long-term assets, such as buildings and equipment. Capital expenditure is not included in the calculation of net income because it is not a cost of doing business.