Utah General Contractors - Business and Law Practice Exam

Which of the following is an example of a financial statement?

1. Profit analysis

2. Balance sheet

3. Tax return

4. Cash receipts journal

The correct answer is: Balance sheet

A balance sheet is indeed an example of a financial statement because it provides a snapshot of a company’s financial position at a specific point in time. It summarizes the assets, liabilities, and equity of a business, illustrating what the company owns and owes. This document is vital for accountants, business owners, and financial analysts as it helps in assessing the liquidity, solvency, and overall financial health of the business. In contrast, profit analysis is more of a detailed examination of profitability rather than a formal financial statement. A tax return, while important for tax purposes, does not primarily serve as a standard financial statement; it is more of a report to tax authorities regarding income, expenses, and tax owed. A cash receipts journal, on the other hand, is a day-to-day recording of cash transactions and does not provide a comprehensive overview of the business's financial status like a balance sheet does. Thus, among the choices, the balance sheet distinctly represents a core component of financial statements.