Florida General Contractor Practice Exam

Which financial statement summarizes the revenues and expenses of a company over a specific period?

1. Balance Sheet

2. Cash Flow Statement

3. Income Statement

4. Statement of Changes in Equity

The correct answer is: Income Statement

The Income Statement is the financial statement that specifically summarizes a company's revenues and expenses over a particular period. This document provides a clear snapshot of the company’s financial performance, illustrating how much money was generated (revenues) and how much was spent (expenses) during that time frame. The ultimate goal of the Income Statement is to show the profit or loss of the company, which is calculated by subtracting total expenses from total revenues. The other financial statements serve different purposes. The Balance Sheet reflects the company’s financial position at a specific point in time, detailing assets, liabilities, and equity, rather than summarizing performance over a period. The Cash Flow Statement tracks the flow of cash in and out of the business, focusing on operational, investment, and financing activities, without providing a breakdown of revenues and expenses. The Statement of Changes in Equity outlines changes in equity accounts over a period but does not summarize revenues and expenses. Understanding these distinctions helps clarify the specific functions of each financial statement, particularly the crucial role of the Income Statement in assessing a company's operational success over a designated period.