Which financial statement displays a company's profit and loss over a specific period of time?

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

Answer: (C)

Verified step by step guidance

1. Understand the purpose of each financial statement: The Income Statement shows a company's revenues, expenses, and profits or losses over a specific period of time. The Balance Sheet provides a snapshot of the company's financial position at a specific point in time. The Statement of Cash Flows details cash inflows and outflows during a period. The Statement of Changes in Equity shows changes in equity over a period.
2. Identify the key term in the question: The question asks for the financial statement that displays a company's profit and loss over a specific period of time.
3. Match the key term 'profit and loss' with the correct financial statement: The Income Statement is specifically designed to show revenues, expenses, and the resulting profit or loss for a given period.
4. Eliminate incorrect options: The Balance Sheet does not show profit and loss but rather assets, liabilities, and equity at a point in time. The Statement of Cash Flows focuses on cash movements, not profit and loss. The Statement of Changes in Equity tracks changes in equity, not profit and loss.
5. Conclude that the correct financial statement for displaying profit and loss over a specific period is the Income Statement.