A net loss occurs when a company's expenses exceed revenues. Hence, the net loss is the amount of money the business lost during the period. After all expenses are paid, the negative amount of cash remaining is this amount.
The company would have net income instead of a loss if total revenues exceeded total expenses. Total expenses are subtracted from total revenues to calculate net loss.
After subtracting the cost of goods sold and operating expenses, the net loss appears at the bottom of the income statement or profit and loss statement. For this reason, many people refer to the net loss as the "bottom line."
Having a net loss does not always mean a business will close. Due to economic factors, short-term net losses may be expected or even planned, and businesses may use retained earnings to continue operating.
There is a difference between net loss and gross loss, which is the negative amount left after subtracting the cost of goods sold from the total revenue.