Utah Contractor Practice Exam

What financial statement summarizes assets, liabilities, and stockholders' equity at a specific date?

1. Balance Sheet

2. Income statement

3. Statement of cash flow

4. All of the above

The correct answer is: Balance Sheet

The balance sheet is the financial statement that provides a snapshot of a company's financial position at a specific point in time. It summarizes the assets owned by the company, which represent its resources; the liabilities, which are the obligations to outside parties; and the stockholders' equity, which reflects the owners' claims on the assets after all liabilities have been settled. This statement is structured in such a way that it aligns with the accounting equation: Assets = Liabilities + Stockholders' Equity. This fundamental equation highlights the relationship between what a company owns and owes, and the residual interest of the shareholders in the assets of the company. In contrast, the income statement reports the company’s financial performance over a period of time, showing income and expenses, and ultimately net profit or loss, but does not provide a snapshot of assets and liabilities. Similarly, the statement of cash flows details cash inflows and outflows over a specific period, focusing on liquidity rather than a static view of financial position. Each of these other statements serves a different purpose, hence making the balance sheet the correct choice for summarizing assets, liabilities, and stockholders' equity as of a specific date.