Which financial statement reports expenses such as rent?

Which financial statement reports expenses such as rent?

• A. Balance Sheet
• B. Income Statement
• C. Cash Flow Statement
• D. Statement of Changes in Equity

Answer: (B)

The income statement is the financial statement that shows a period of operations by listing revenues and expenses, including rent, to arrive at net income or loss. Rent expense is recognized in the period it relates to, reducing operating income, which is why it appears on the income statement. The balance sheet, by contrast, reflects a snapshot of assets, liabilities, and equity at a moment in time (though prepaid rent can be an asset if paid in advance, the expense itself isn’t shown there). The cash flow statement focuses on actual cash movements and would show rent payments as a cash outflow under operating activities, not as an expense line item. The statement of changes in equity tracks changes in owner’s equity, not operating performance. So the correct answer is the income statement.

The income statement is the financial statement that shows a period of operations by listing revenues and expenses, including rent, to arrive at net income or loss. Rent expense is recognized in the period it relates to, reducing operating income, which is why it appears on the income statement. The balance sheet, by contrast, reflects a snapshot of assets, liabilities, and equity at a moment in time (though prepaid rent can be an asset if paid in advance, the expense itself isn’t shown there). The cash flow statement focuses on actual cash movements and would show rent payments as a cash outflow under operating activities, not as an expense line item. The statement of changes in equity tracks changes in owner’s equity, not operating performance. So the correct answer is the income statement.