Which financial statement would you consult to find the owner's equity of a company?

Which financial statement would you consult to find the owner's equity of a company?

• A. Income statement
• B. Balance sheet
• C. Cash flow statement
• D. Statement of changes in equity

Answer: (B)

Owner's equity appears on the balance sheet, which shows the company’s financial position at a specific date. The balance sheet lists assets, liabilities, and owners' equity, with the equity section representing the owners’ claim after all liabilities are subtracted from assets. This section includes contributed capital, retained earnings, and other equity accounts, giving the exact owners’ equity balance as of the reporting date. The income statement covers performance over a period (revenues and expenses), and while net income affects retained earnings, it doesn’t present the current equity balance by itself. The cash flow statement tracks cash movements, not the equity amount. The statement of changes in equity shows how equity components changed during the period, but the ending owner’s equity figure is found on the balance sheet.

Owner's equity appears on the balance sheet, which shows the company’s financial position at a specific date. The balance sheet lists assets, liabilities, and owners' equity, with the equity section representing the owners’ claim after all liabilities are subtracted from assets. This section includes contributed capital, retained earnings, and other equity accounts, giving the exact owners’ equity balance as of the reporting date.

The income statement covers performance over a period (revenues and expenses), and while net income affects retained earnings, it doesn’t present the current equity balance by itself. The cash flow statement tracks cash movements, not the equity amount. The statement of changes in equity shows how equity components changed during the period, but the ending owner’s equity figure is found on the balance sheet.