CSLB Law & Business ExamBusiness FinancesEasy
Which financial statement shows a contractor's revenues, expenses, and net profit or loss over a specific period, such as a month or a quarter?
- AIncome Statement
- BStatement of Retained Earnings
- CBalance Sheet
- DAccounts Receivable Aging Report
Show answer & explanationAnswer & explanation
Correct answer: A. Income Statement
The Income Statement (also called a Profit and Loss statement) summarizes revenue and expenses over a period of time to show net profit or loss. The Balance Sheet, by contrast, shows a snapshot of assets, liabilities, and equity on a single date.
Why the other options are wrong
- B. This tracks changes in retained earnings, not overall revenue and expense activity.
- C. The Balance Sheet is a point-in-time snapshot, not a period summary of revenue/expense.
- D. This report tracks unpaid customer invoices by age, not overall profitability.
Income Statement
A financial report showing revenues, expenses, and net profit or loss over a specific period of time.
- Also called Profit & Loss (P&L) statement
- Covers a period, unlike the Balance Sheet's single date
- Net profit = Total revenue − Total expenses
Memory trick: Income statement = 'in-come, over-time' — money flowing across a period.