Which financial statement shows revenues and expenses over a period of time?

Which financial statement shows revenues and expenses over a period of time?

• A. Balance sheet
• B. Income statement
• C. Statement of cash flows
• D. Statement of changes in equity

Answer: (B)

The main idea being tested is which financial statement tracks earnings over a period of time. An income statement does this by listing revenues earned and expenses incurred during a defined period (like a month, quarter, or year), showing the resulting net income or loss. For a landscaping contractor, this means you’d record all service revenues (lawn care, landscape installations, maintenance contracts) and all related costs (labor, materials, equipment fuel, subcontractors, depreciation) within the same period to see how profitable that span was.

In contrast, the balance sheet shows what the business owns and owes at a single point in time; the statement of cash flows shows how cash moved in and out during the period; and the statement of changes in equity shows changes to owner’s equity over the period due to contributions, withdrawals, and retained earnings.