Future Business Leaders of America (FBLA) Accounting Practice Test

Which financial statement shows the revenue and expenses for a fiscal period?

1. Balance Sheet

2. Income Statement

3. Trial Balance

4. Work Sheet

The correct answer is: Income Statement

The income statement is the financial statement that presents the revenues and expenses for a specific fiscal period. It summarizes the company’s performance over that time frame, detailing how much money the company earned from its operations (revenues) and what it spent to operate (expenses). The difference between total revenues and total expenses results in the net income or net loss for that period, providing valuable insight into the company’s profitability. This statement is crucial for investors and stakeholders as it reflects the operating efficiency of the business and indicates how well management is generating profits from the company’s resources. It contrasts with other financial statements, which serve different purposes; for example, the balance sheet summarizes assets, liabilities, and equity at a specific point in time, while the trial balance is an internal report used to verify the equality of debits and credits in the accounting records. A work sheet is often used for internal accounting processes and to assist in the preparation of financial statements but does not serve as a final financial statement itself.