Utah Contractor Practice Exam

Which financial statement provides a summary of a company’s financial position at a specific point in time?

1. Income statement

2. Balance sheet

3. Cash flow statement

4. Statement of changes in equity

The correct answer is: Balance sheet

The balance sheet is the financial statement that provides a summary of a company's financial position at a specific point in time. It presents a snapshot of what the company owns (assets), what it owes (liabilities), and the equity of the owners at that moment. This statement is essential for understanding the company's overall financial health, as it showcases the relationship between assets and liabilities, enabling stakeholders to assess liquidity and financial viability. In contrast, the income statement focuses on the company's revenues and expenses over a period, reflecting profitability rather than a point-in-time financial position. The cash flow statement tracks the flow of cash in and out of the business, providing insights into how cash is generated and used over time. The statement of changes in equity shows the movements in equity accounts, such as retained earnings or additional capital, during a specific timeframe. While all these reports are vital for a comprehensive view of a company's financial performance, the balance sheet is unique for presenting the financial status at a specific instant.