What is the purpose of the statement of financial position?
A)To determine the cash inflows and outflows over a period of time
B)To determine the profit earned over a period of time
C)To list the assets of the business and the claims against the assets at a particular point of time
D)All of the above

Question

Quizplus · Accepted Answer

The purpose of the statement of financial position is to list the assets of the business and the claims against the assets at a particular point of time. It provides a snapshot of the financial position of the business at a given date.

Option A is incorrect because the statement of financial position does not provide information on cash inflows and outflows; that information is provided in the cash flow statement.

Option B is incorrect because the statement of financial position does not provide information on the profit earned over a period of time; that information is provided in the income statement.

Option D is incorrect because while the statement of financial position is an important financial statement, it does not provide all the information that these three statements (statement of financial position, income statement, and cash flow statement) collectively provide.

What Is the Purpose of the Statement of Financial Position