Which financial statement primarily captures information about a company's sales revenue?

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

Answer: (B)

Verified step by step guidance

1. Understand the purpose of each financial statement: The Income Statement reports a company's financial performance over a specific period, including sales revenue, expenses, and net income. The Balance Sheet provides a snapshot of the company's financial position at a specific point in time, showing assets, liabilities, and equity. The Statement of Cash Flows details cash inflows and outflows, while the Statement of Changes in Equity tracks changes in equity accounts.
2. Identify the financial statement that includes sales revenue: Sales revenue is a component of a company's financial performance, which is captured in the Income Statement. This statement starts with revenue and subtracts expenses to calculate net income.
3. Recognize the structure of the Income Statement: The Income Statement typically begins with sales revenue (or total revenue), followed by the cost of goods sold (COGS), operating expenses, and other income or expenses, leading to the calculation of net income.
4. Eliminate incorrect options: The Statement of Changes in Equity does not include sales revenue; it focuses on equity changes. The Statement of Cash Flows tracks cash movements, not revenue. The Balance Sheet shows assets, liabilities, and equity but does not detail revenue.
5. Conclude that the Income Statement is the correct financial statement for capturing information about a company's sales revenue.