DECA Financial Consulting Practice Exam

The balance sheet is the financial statement that summarizes a company's assets, liabilities, and equity at a specific point in time. It provides a snapshot of the financial position of the company, showing what it owns (assets), what it owes (liabilities), and the residual interest of the owners (equity). This statement adheres to the accounting equation, which states that Assets = Liabilities + Equity.

The income statement, in contrast, focuses on a company's revenues and expenses over a period of time, detailing its profitability rather than its financial position. The cash flow statement tracks the inflows and outflows of cash in operating, investing, and financing activities, providing insights into the company’s liquidity but not its overall financial structure. The statement of retained earnings details the changes in retained earnings over a period but does not encompass the full picture of assets and liabilities, making it less comprehensive than the balance sheet in this context.