A cash-flow balance occurs when total income equals total expenses.

• A. When total income exceeds total expenses.
• B. When expenses exceed income.
• C. When income equals total assets.
• D. When income equals expenses.

Answer: (D)

Cash flow balance means the money coming in matches the money going out in a given period—the inflows offset the outflows so there’s no net gain or loss. The statement that best describes this is when income equals expenses. That exact pairing produces zero net cash flow, which is what “balance” implies.

If income were to exceed expenses, you’d have a positive cash flow and a surplus you could save or invest. If expenses exceed income, you’d have a negative cash flow or deficit, needing to draw from savings or borrow. The ideas of income matching assets aren’t about the cash movements in a period, so they don’t describe a cash-flow balance.