Multiple Choice
The purpose of the statement of shareholders' equity is to:
19
views
1. Introduction to Accounting
The Financial Statements
Struggling with Financial Accounting?
Join thousands of students who trust us to help them ace their exams!Watch the first videoMultiple Choice
Which of the following best describes the role of an income statement in accounting?
A
It is a source document used to record original business transactions.
B
It is a document used to authorize payments to suppliers.
C
It is a financial statement that summarizes revenues and expenses over a period.
D
It is a ledger account used to track cash balances.
Verified step by step guidance1
Understand the purpose of an income statement: It is a financial statement that provides a summary of a company's revenues, expenses, and profits or losses over a specific period, typically a month, quarter, or year.
Compare the given options to the definition of an income statement: Evaluate each option to determine which aligns with the purpose of summarizing revenues and expenses.
Option 1: 'It is a source document used to record original business transactions.' This describes documents like invoices or receipts, not an income statement.
Option 2: 'It is a document used to authorize payments to suppliers.' This refers to payment authorizations, not the role of an income statement.
Option 4: 'It is a ledger account used to track cash balances.' This describes a cash ledger account, not an income statement. Therefore, the correct answer is the third option: 'It is a financial statement that summarizes revenues and expenses over a period.'
Related Videos
Related Practice
The Financial Statements practice set
Problem sets built by lead tutorsExpert video explanations