Entrepreneurship and Small Business (ESB) V2 Certification Practice Exam

Which financial statement shows total revenues and expenses for a specific period of time?

1. Balance Sheet

2. Income Statement

3. Cash Flow Statement

4. Retained Earnings Statement

The correct answer is: Income Statement

The income statement is the financial statement that specifically shows total revenues and expenses for a defined period, typically over a month, quarter, or year. This document provides a summary of earnings and costs incurred, which is crucial for assessing the financial performance of a business. It ultimately reflects whether the company made a profit or incurred a loss over that period. The other financial statements serve different purposes. The balance sheet, for instance, offers a snapshot of a company's assets, liabilities, and equity at a particular point in time, rather than a summary of activities over a period. The cash flow statement tracks the inflows and outflows of cash, detailing how cash is generated and used, but does not directly showcase revenues and expenses. The retained earnings statement outlines changes in equity and retained earnings over a specific period but does not provide a comprehensive view of revenues and expenses like the income statement does. Overall, the income statement is essential for evaluating profitability and operational efficiency, making it the correct choice in identifying total revenues and expenses over a specified time frame.