A profit and loss statement is also known as which financial statement?

A profit and loss statement is also known as which financial statement?

• A. Income Statement
• B. Balance Sheet
• C. Cash Flow Statement
• D. Statement of Changes in Equity

Answer: (A)

Profitability over a period is shown by the income statement, which lists revenues and expenses to arrive at net income or loss for that period. This is exactly what the profit and loss statement measures: how much the business earned and what it spent during the period. The balance sheet, in contrast, is a snapshot of what the business owns and owes at a specific date. The cash flow statement tracks actual cash inflows and outflows. The statement of changes in equity shows how owners’ equity changes during the period. So the income statement is the correct name for the profit and loss statement.

Profitability over a period is shown by the income statement, which lists revenues and expenses to arrive at net income or loss for that period. This is exactly what the profit and loss statement measures: how much the business earned and what it spent during the period. The balance sheet, in contrast, is a snapshot of what the business owns and owes at a specific date. The cash flow statement tracks actual cash inflows and outflows. The statement of changes in equity shows how owners’ equity changes during the period. So the income statement is the correct name for the profit and loss statement.