What is carried to the Exhibit of Net Investment Income, and used in calculating net investment income earned for the year?

Question

Options

• ARevenues
• Bliabilities
• CExpenses
• DAll of the above

• A
  7% (1)
• C
  79% (11)
• D
  14% (2)

Explanation

Expenses are carried to the Exhibit of Net Investment Income because net investment income is calculated by subtracting investment-related expenses from gross investment income earned - making expenses the key deduction that converts a gross figure into a net figure. The exhibit begins with gross investment income already recorded, so revenues (A) are the starting point, not the item "carried to" the exhibit - they're already there as the base. Liabilities (B) are balance sheet items representing obligations owed, and have no role in an income-based calculation like this one. Since both A and B are incorrect, D (All of the above) is eliminated automatically.

Memory tip: Think of the word net - to get from gross to net, you always subtract. What you subtract are expenses. "Net = Gross minus Expenses" - the E in NET can remind you it's Expenses that do the work in this exhibit.

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