Question

Lauren is trying to find her net income. She used the statement and the steps shown.

A blank monthly income statement.


Step 1 List all income, including tips and commissions, and list all expenses, including food, entertainment, and clothing.
Step 2 Total all the income. Then total all the expenses.
Step 3 Add the total of the income and the expenses.

Which explains Lauren’s error?
Lauren made an error in step 1 because she should not include tips and commissions in her income.
Lauren made an error in step 1 because she should not include entertainment in her expenses.
Lauren made an error in step 2 because she does not need to total the expenses.
Lauren made an error in step 3 because she should have subtracted the expenses from the income.

Answer 1

Lauren made an error in step 3 because she should have subtracted the expenses from the income.

Net income = total income − total expenses, not total income + total expenses. Options about step 1 and 2 are incorrect because tips/commissions are income, entertainment is an expense, and totaling expenses is necessary.