Which term describes a financial situation where expenses are higher than income?

The term that accurately describes a financial situation where expenses exceed income is "deficit." A deficit occurs when an individual, organization, or government spends more money than it generates in revenue or income during a specified period. This situation can lead to the accumulation of debt if it continues over time, as the entity will need to borrow funds to cover the shortfall.

In contrast, the other terms—credit, balance, and equity—represent different financial concepts. Credit refers to the ability to borrow money or purchase goods with the promise to pay later. Balance typically refers to the amount remaining in an account after transactions and is related to the concept of financial stability, while equity pertains to ownership value in an asset after subtracting liabilities. These terms do not indicate a scenario of exceeding expenses over income, making "deficit" the most appropriate choice in this context.