Which report is one of the three primary financial statements?

• A. Income statement
• B. Balance sheet
• C. Cash flow statement
• D. Statement of stockholders' equity

Answer: (A)

The main idea is recognizing the standard set of financial reports used to evaluate a company’s performance, position, and cash activity. The income statement—often called the profit and loss statement—summarizes revenues and expenses over a period to show net income or loss, which is why it’s included as one of the three primary statements. The other two primary statements provide different views: the balance sheet shows assets, liabilities, and shareholders’ equity at a specific date, and the cash flow statement tracks cash inflows and outflows over a period. The statement of stockholders’ equity is important for understanding changes in equity, but it is not usually listed as one of the three primary statements in introductory accounting. So the income statement is the best pick because it is one of the standard trio of primary financial reports.