Which of the following best describes what the statement of owner's equity reports?

• A. Changes in the owner's capital account during a period, including investments, net income or loss, and withdrawals.
• B. The revenues and expenses of a business for a specific period.
• C. The assets, liabilities, and owner's equity of a business at a specific point in time.
• D. The cash inflows and outflows from operating, investing, and financing activities.

Answer: (A)

Verified step by step guidance

1. Step 1: Understand the purpose of the statement of owner's equity. It is a financial statement that reports changes in the owner's capital account over a specific period. This includes investments made by the owner, net income or loss from business operations, and withdrawals by the owner.
2. Step 2: Compare the statement of owner's equity to other financial statements. For example, the income statement reports revenues and expenses for a specific period, the balance sheet reports assets, liabilities, and owner's equity at a specific point in time, and the cash flow statement reports cash inflows and outflows from operating, investing, and financing activities.
3. Step 3: Identify the key components of the statement of owner's equity. These include the beginning capital balance, additional investments, net income or loss, withdrawals, and the ending capital balance.
4. Step 4: Analyze the options provided in the problem. The correct description of the statement of owner's equity is the one that focuses on changes in the owner's capital account during a period, including investments, net income or loss, and withdrawals.
5. Step 5: Confirm the correct answer by matching the description of the statement of owner's equity to the options provided. The correct answer is the first option: 'Changes in the owner's capital account during a period, including investments, net income or loss, and withdrawals.'