Florida General Contractor Practice Exam

In a contractor's accounting, which of the following refers to income received from all operations?

1. Net Income

2. Gross Income

3. Operating Income

4. Retained Earnings

The correct answer is: Gross Income

Gross income is the correct term that refers to all income received from operations before any expenses are deducted. In the context of a contractor's accounting, this figure encompasses all revenue generated from the various activities and services provided by the contractor. Gross income serves as an important indicator of a company's financial health, showing the total earnings from its core business operations. The other terms, while related to income and financial performance, are distinct in their meanings. For instance, net income represents the profit remaining after all expenses, taxes, and costs have been subtracted from gross income. Operating income, on the other hand, reflects the profit earned from a company’s core business operations, excluding any income derived from investments or peripheral activities. Retained earnings denote the portion of net income that is held by the company rather than distributed as dividends, effectively showing accumulated profit over time that can be reinvested in the business. Understanding these distinctions is key for contractors as they manage their finances, assess performance, and make informed decisions regarding their operations.