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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 ($\text{Assets} = \text{Liabilities} + \text{Owner's Equity}$)?

  • Income Statement
  • Statement of Cash Flows
  • Balance Sheet✔️
  • Statement of Changes in 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.