Which financial report summarizes income and expenses over a period?

• A. Income statement (profit and loss statement)
• B. Cash flow statement
• C. Balance sheet
• D. Statement of retained earnings

Answer: (A)

The main idea here is performance over time. An income statement, also called the profit and loss statement, gathers all the revenues the business earned and all the expenses it incurred during a specific period, then shows the resulting net income or net loss. This is precisely what you need to see how the business performed financially over that span.

In contrast, a cash flow statement tracks actual cash moving in and out, which can differ from income because of timing of receipts and payments. A balance sheet gives a snapshot of what the company owns and owes at a single moment in time, not how it performed over a period. The statement of retained earnings shows how retained earnings changed during the period, starting from the prior period’s balance and adjusting for net income and dividends.

So, for a period-wide summary of income and expenses, the income statement is the best choice.