Which financial statement shows changes in equity accounts over a period?

• A. Income Statement
• B. Balance Sheet
• C. Cash Flow Statement
• D. Statement of Stockholders' Equity

Answer: (D)

The main idea here is that only one financial statement specifically tracks how owners’ claims on the company change over a period. The statement of stockholders’ equity breaks down each equity account—such as common stock, additional paid-in capital, retained earnings, treasury stock, and accumulated other comprehensive income—and shows how beginning balances mix with net income, dividends, stock issuances or repurchases, and other items to produce ending balances.

This makes it the best choice because it directly links activities that affect equity to the accounts that represent owners’ claims, giving a clear view of how equity evolved during the period. In contrast, the income statement summarizes performance (revenues and expenses) but doesn’t show the full changes in equity; the balance sheet shows only ending balances at a single point in time; and the cash flow statement focuses on cash movements, including financing that affects cash, but not the complete set of equity account changes. Together, the statement of stockholders’ equity provides the complete picture of how equity changed over the period.