Which report shows the earnings of the business for a selected period? Please choose the correct answer.

Question

Options

• AProfit and Loss
• BTrial Balance
• CBalance Sheet
• DCash Flow

• A
  93% (26)
• C
  4% (1)
• D
  4% (1)

Explanation

Profit and Loss (A) is correct because it summarizes a business's revenues and expenses over a specific time period, directly showing whether the business made a profit or incurred a loss - making it the go-to report for measuring earnings.

Why the others are wrong:

• B. Trial Balance is a bookkeeping worksheet listing all ledger account balances to verify debits equal credits - it's a verification tool, not an earnings report.
• C. Balance Sheet shows what a business owns (assets) and owes (liabilities) at a single point in time - it's a snapshot of financial position, not earnings.
• D. Cash Flow tracks the movement of cash in and out of the business - it shows liquidity, not profitability or earnings.

Memory tip: Think "P&L = Performance and Livelihood" - it tells you how well the business performed over a period and whether it can sustain its livelihood (profit vs. loss).

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