Contractor License Practice Exam

The financial statement that shows the financial status of a company at a specific date is known as?

1. Income Statement

2. Balance Sheet

3. Cash Flow Statement

4. Statement of Retained Earnings

The correct answer is: Balance Sheet

The balance sheet is the financial statement that provides a snapshot of a company's financial status at a specific point in time. It details the company's assets, liabilities, and shareholders' equity, allowing stakeholders to assess the financial health and stability of the business. The balance sheet is structured around the fundamental accounting equation: Assets = Liabilities + Equity, which emphasizes the relationship between what the company owns and owes, along with the equity that belongs to the owners. In contrast, the income statement summarizes revenues and expenses over a period, showing how much profit or loss the company made during that time period but does not indicate the financial position at a specific date. The cash flow statement tracks the inflow and outflow of cash over a period, providing insights into operational cash flow but again not focusing on a single point in time. The statement of retained earnings reflects changes in equity during a reporting period but does not directly present the overall financial position like the balance sheet does. This is why the balance sheet is the appropriate choice for depicting the financial position of a company at a specific date.