Future Business Leaders of America (FBLA) Accounting Practice Test

What type of financial statement reports assets, liabilities, and owner's equity on a specific date?

1. Income Statement

2. Cash Flow Statement

3. Balance Sheet

4. Statement of Retained Earnings

The correct answer is: Balance Sheet

The correct choice is the balance sheet, which provides a snapshot of a company's financial position at a specific point in time. It details the company's assets, liabilities, and owner's equity, allowing stakeholders to understand what the company owns (assets), what it owes (liabilities), and the residual interest of the owners (owner's equity). This distinction is important because while the income statement focuses on a company's performance over a period, showing revenues and expenses to determine profitability, and the cash flow statement details the inflows and outflows of cash, the balance sheet stands alone as a point-in-time representation of financial health. The statement of retained earnings is a financial statement that connects the income statement and the balance sheet but does not itself report assets or liabilities. It only reflects changes in retained earnings over a specific period. Therefore, the balance sheet is the essential report that specifically outlines assets, liabilities, and owner's equity as of a particular date.