Utah Contractor Practice Exam

What is another name for the income statement?

1. Balance sheet

2. Profit and loss statement

3. Cash flow statement

4. Sales and revenues

The correct answer is: Profit and loss statement

The income statement is commonly referred to as a profit and loss statement. This financial document summarizes the revenues and expenses over a specific period, indicating how much profit or loss a company has made. The term "profit and loss" highlights its primary purpose: to provide insight into a company's financial performance by displaying net income (or loss) after all expenses have been accounted for. In contrast, a balance sheet reflects a company's financial position at a specific point in time, detailing assets, liabilities, and equity. The cash flow statement focuses on the inflow and outflow of cash within the business, providing information about the company's liquidity. Sales and revenues refer to the income generated from business activities but do not encapsulate the full scope of expenses, thereby not being synonymous with the income statement itself.