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Multiple Choice
Which financial statement reports the current year's cash balance at the end of the period?
A
Statement of Retained Earnings
B
Statement of Stockholders' Equity
C
Income Statement
D
Statement of Cash Flows
Verified step by step guidance
1
Understand the purpose of each financial statement: The Statement of Retained Earnings shows changes in retained earnings over a period, the Statement of Stockholders' Equity details changes in equity accounts, and the Income Statement reports revenues and expenses to calculate net income. The Statement of Cash Flows, however, focuses on cash inflows and outflows during a period and reports the ending cash balance.
Recognize that the Statement of Cash Flows is divided into three sections: operating activities, investing activities, and financing activities. These sections collectively explain how cash is generated and used during the period.
Identify that the ending cash balance is calculated by summing the net cash flows from operating, investing, and financing activities, and adding this to the beginning cash balance.
Note that the ending cash balance reported in the Statement of Cash Flows corresponds to the cash balance shown on the Balance Sheet at the end of the period.
Conclude that the Statement of Cash Flows is the financial statement that explicitly reports the current year's cash balance at the end of the period.