Which financial statement includes owner equity?

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

Answer: (C)

Owner equity is the claim the owner has on the business after all debts are paid, and it’s shown on the balance sheet because that statement displays the financial position at a specific date: what the business owns (assets), what it owes (liabilities), and what the owner has invested or earned and left in the business (owner’s equity). This fits the fundamental accounting equation: Assets = Liabilities + Owner’s Equity. The balance sheet is the snapshot that captures this relationship at a point in time, whereas the income statement and cash flow statement cover performance and cash movements over a period, and the equity statement tracks changes in equity over time. In sole proprietorships it’s called owner’s equity (and in corporations, shareholders’ equity), but both appear on the balance sheet as the owner’s or shareholders’ stake in the assets.