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SSC Financial and Cost Accounting P-1
QUESTION #6058
Question 1
Which financial statement directly represents and reflects the accounting equation ($\text{Assets} = \text{Liabilities} + \text{Owner's Equity}$)?
Correct Answer Explanation
The Balance Sheet (also called the Statement of Financial Position) is a snapshot of a business at a point in time, structured as: $\text{Assets} = \text{Liabilities} + \text{Owner's Equity}$. This is a direct representation of the accounting equation. The income statement shows revenues and expenses; the cash flow statement shows cash movements; and the statement of changes in equity shows movements in equity accounts.
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