International Association of Accessibility Professionals (IAAP) Certified Administrative Professional (CAP) Practice Exam

What does an income statement show?

1. The assets and liabilities of a company

2. The owner's equity in a business

3. The revenue and expenses over a period

4. The cash flow into and out of the business

The correct answer is: The revenue and expenses over a period

An income statement is a financial report that summarizes the revenues, costs, and expenses incurred during a specific period of time, such as a quarter or a year. It provides insight into a company's ability to generate profit by revealing how much money it earned from sales and how much it spent on operating expenses. The income statement ultimately culminates in the net income or loss for that period, making it a critical tool for stakeholders to assess the financial performance of the business. The other options focus on different financial statements or aspects of financial reporting. While the assets and liabilities of a company are shown in the balance sheet, the owner's equity is also reflected in that statement, and cash flow information is articulated through the cash flow statement. Each of these reports serves a distinct purpose, but the income statement specifically emphasizes revenue generation and expense management, aligning directly with the components highlighted in the correct answer.