Which financial statement shows the owner’s change in capital over time?

Which financial statement shows the owner’s change in capital over time?

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

Answer: (D)

The main idea here is tracking how the owner's capital changes over a period. The statement of equity is designed to show all factors that increase or decrease owner’s capital—contributions by the owner, withdrawals or drawings, and the net income or loss from the period—resulting in the ending equity balance. It links what happened during the period (earnings, owner inputs, withdrawals) to the financial position at the end of the period, which the balance sheet reflects. The other statements serve different purposes: the cash flow statement tracks cash movements; the balance sheet shows a snapshot of assets, liabilities, and equity at one point in time; and the income statement shows revenues and expenses over the period. So the correct one is the statement of equity.

The main idea here is tracking how the owner's capital changes over a period. The statement of equity is designed to show all factors that increase or decrease owner’s capital—contributions by the owner, withdrawals or drawings, and the net income or loss from the period—resulting in the ending equity balance. It links what happened during the period (earnings, owner inputs, withdrawals) to the financial position at the end of the period, which the balance sheet reflects. The other statements serve different purposes: the cash flow statement tracks cash movements; the balance sheet shows a snapshot of assets, liabilities, and equity at one point in time; and the income statement shows revenues and expenses over the period. So the correct one is the statement of equity.