Multiple Choice
In financial accounting, what is the primary purpose of a balance sheet?
1. Introduction to Accounting
The Financial Statements
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In financial accounting, what is another common name for the income statement?
A
Statement of operations
B
Statement of cash flows
C
Statement of financial position
D
Statement of changes in equity
Verified step by step guidance1
Understand that the income statement is a financial report that summarizes a company's revenues, expenses, and profits or losses over a specific period.
Recognize that the income statement is also commonly referred to by another name that emphasizes its focus on operational performance.
Review the options given: 'Statement of operations', 'Statement of cash flows', 'Statement of financial position', and 'Statement of changes in equity'.
Recall that the 'Statement of cash flows' reports cash inflows and outflows, the 'Statement of financial position' is another name for the balance sheet, and the 'Statement of changes in equity' shows changes in owners' equity.
Conclude that the income statement is also commonly called the 'Statement of operations' because it details the company's operational results.
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