Which financial statement would you consult to see changes in owner's equity during a period?

Which financial statement would you consult to see changes in owner's equity during a period?

• A. Balance sheet
• B. Statement of owner's equity
• C. Cash flow statement
• D. Income statement

Answer: (B)

This question focuses on where you find how owner's equity changes over a period. The balance sheet only gives a snapshot of ending balances at a specific date, not how those balances evolved. The income statement shows what happened to revenue and expenses to reach net income, which affects equity indirectly, but it doesn’t lay out the actual changes in the equity account itself. The cash flow statement tracks cash inflows and outflows, including financing activities, but it doesn’t summarize the movement in owner's equity. The statement of owner's equity directly shows the changes during the period—opening equity, plus investments and net income, minus withdrawals or losses—arriving at ending equity. That makes it the best source for understanding how owner’s equity changed over the period.

This question focuses on where you find how owner's equity changes over a period. The balance sheet only gives a snapshot of ending balances at a specific date, not how those balances evolved. The income statement shows what happened to revenue and expenses to reach net income, which affects equity indirectly, but it doesn’t lay out the actual changes in the equity account itself. The cash flow statement tracks cash inflows and outflows, including financing activities, but it doesn’t summarize the movement in owner's equity. The statement of owner's equity directly shows the changes during the period—opening equity, plus investments and net income, minus withdrawals or losses—arriving at ending equity. That makes it the best source for understanding how owner’s equity changed over the period.