Which of the following financial statements are normally included in public reports?

• A. Statement of Cash Flows, Tax Return, and Payroll Register
• B. Trial Balance, General Ledger, and Bank Reconciliation Statement
• C. Income Statement, Budget Report, and Audit Report
• D. Balance Sheet, Income Statement, Statement of Cash Flows, and Statement of Changes in Equity

Answer: (D)

Verified step by step guidance

1. Step 1: Understand the purpose of public financial reports. Public financial reports are designed to provide stakeholders, such as investors, creditors, and regulators, with a clear picture of a company's financial health and performance.
2. Step 2: Identify the key financial statements typically included in public reports. These are the Balance Sheet, Income Statement, Statement of Cash Flows, and Statement of Changes in Equity. Each serves a specific purpose: the Balance Sheet shows the company's financial position, the Income Statement reflects profitability, the Statement of Cash Flows tracks cash movements, and the Statement of Changes in Equity explains changes in ownership equity.
3. Step 3: Eliminate options that are not typically part of public financial reports. For example, Tax Return, Payroll Register, Trial Balance, General Ledger, Bank Reconciliation Statement, Budget Report, and Audit Report are internal documents or specialized reports not included in standard public financial reporting.
4. Step 4: Confirm the correct answer by cross-referencing with accounting standards such as IFRS (International Financial Reporting Standards) or GAAP (Generally Accepted Accounting Principles), which mandate the inclusion of the Balance Sheet, Income Statement, Statement of Cash Flows, and Statement of Changes in Equity in public reports.
5. Step 5: Summarize the reasoning: Public financial reports focus on providing comprehensive and standardized financial information to external stakeholders, which is why the Balance Sheet, Income Statement, Statement of Cash Flows, and Statement of Changes in Equity are included.