Which of the following items are included in a business's set of financial statements?

• A. Income statement, Balance sheet, and Statement of cash flows.
• B. Income statement only.
• C. Balance sheet only.
• D. Statement of cash flows only.

Answer: (A)

The essential set of financial statements covers profitability, financial position, and cash movement. Specifically, the income statement shows revenues minus expenses to reveal profit or loss over a period; the balance sheet presents what the company owns and owes at a point in time (assets, liabilities, and equity); and the statement of cash flows tracks how cash changed during the period, linking to both the income statement and the balance sheet. Net income from the income statement affects equity on the balance sheet through retained earnings, while the cash flow statement explains actual cash movements and reconciles beginning and ending cash balances. Put together, these three provide a complete view of how the business performed, what it owns versus owes, and how cash flowed, which is why they are included in a standard set of financial statements. Other options that include only one statement omit important information about either performance, position, or cash, making them incomplete.