# Financial statements

> A report of revenue and expenses over a period.

Course: [Financial accounting fundamentals](https://studybrix.com/en/courses/financial-accounting/index.md)
Level: university
Prerequisites: Basic arithmetic and percentages.

## Notes

### Income statement

A report of revenue and expenses over a period.

### Balance sheet

A report of assets, liabilities and equity at a point in time.

### Cash flow statement

A report grouping cash inflows and outflows by activity type.

### Retained earnings

Accumulated earnings retained in the entity after distributions, subject to the accounting framework.

## Practice questions

### 1. Which term best matches this description: A report of revenue and expenses over a period.

A. Balance sheet
B. Retained earnings
C. Income statement
D. Cash flow statement

Answer: Income statement

Explanation: Income statement is the matching concept in this lesson.

### 2. Which term best matches this description: A report of assets, liabilities and equity at a point in time.

A. Income statement
B. Balance sheet
C. Retained earnings
D. Cash flow statement

Answer: Balance sheet

Explanation: Balance sheet is the matching concept in this lesson.

### 3. Which concept would you apply first in a situation where a report grouping cash inflows and outflows by activity type.

A. Cash flow statement
B. Income statement
C. Retained earnings
D. Balance sheet

Answer: Cash flow statement

Explanation: The scenario directly calls for Cash flow statement.

### 4. Name the concept described as: Accumulated earnings retained in the entity after distributions, subject to the accounting framework.

Answer: Retained earnings

Explanation: The intended concept is Retained earnings.

### 5. Which statement about Income statement is most accurate?

A. A report of revenue and expenses over a period.
B. Accumulated earnings retained in the entity after distributions, subject to the accounting framework.
C. A report of assets, liabilities and equity at a point in time.
D. A report grouping cash inflows and outflows by activity type.

Answer: A report of revenue and expenses over a period.

Explanation: The definition in the lesson notes gives the required condition.

### 6. Explain one important difference between Income statement and Balance sheet.

Sample answer / marking guidance: Income statement: A report of revenue and expenses over a period. Balance sheet: A report of assets, liabilities and equity at a point in time.

Explanation: Credit a clear distinction using both definitions and an appropriate example if supplied.

### 7. Give a short example showing how Cash flow statement would be used in practice.

Sample answer / marking guidance: A valid example should demonstrate this idea: A report grouping cash inflows and outflows by activity type.

Explanation: Credit a relevant scenario that applies the concept rather than merely naming it.

### 8. Summarize why Retained earnings matters in the lesson “Financial statements”.

Sample answer / marking guidance: Retained earnings matters because Accumulated earnings retained in the entity after distributions, subject to the accounting framework.

Explanation: Credit the core purpose, scope and any important limitation from the notes.

## Further reading

- https://openstax.org/details/books/principles-financial-accounting

Original AI-assisted educational draft; not independently teacher-reviewed. References support further study, not copied exercises, affiliation or curriculum accreditation.