Multiple Choice
Which of the following best defines the Income Summary account?
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1. Introduction to Accounting
The Financial Statements
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Which of the following is considered a financial statement?
A
General Ledger
B
Balance Sheet
C
Statement of Cash Flows
D
Trial Balance
Verified step by step guidance1
Understand the concept of financial statements: Financial statements are formal records of the financial activities and position of a business, person, or other entity. They typically include the Balance Sheet, Income Statement, and Statement of Cash Flows.
Identify the purpose of each item listed in the problem: The General Ledger is a detailed record of all financial transactions, not a financial statement. The Trial Balance is a summary of all ledger accounts to ensure debits equal credits, also not a financial statement.
Recognize the Balance Sheet as a financial statement: The Balance Sheet provides a snapshot of an entity's financial position at a specific point in time, showing assets, liabilities, and equity.
Recognize the Statement of Cash Flows as a financial statement: The Statement of Cash Flows details the inflows and outflows of cash within an entity over a period, categorized into operating, investing, and financing activities.
Conclude that the Balance Sheet and Statement of Cash Flows are financial statements, while the General Ledger and Trial Balance are not.
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