Which statement measures profitability over a year or more?

Which statement measures profitability over a year or more?

• A. Cash Flow Statement
• B. Balance Sheets
• C. List of liabilities
• D. Profit and Loss Account

Answer: (D)

Profitability over a year or more is shown by the Profit and Loss Account because it records all revenues earned and all costs incurred during the period and then calculates the net profit or loss. This directly reflects how much money the business made after expenses across the year, not just how much cash it has or what its position is on a given date. The cash flow statement tracks cash inflows and outflows, which can differ from profit due to timing. The balance sheet shows assets, liabilities and equity at a single point in time. A list of liabilities isn’t a standard statement and doesn’t indicate profitability. So the Profit and Loss Account is the best choice for measuring profitability over a year or longer.

Profitability over a year or more is shown by the Profit and Loss Account because it records all revenues earned and all costs incurred during the period and then calculates the net profit or loss. This directly reflects how much money the business made after expenses across the year, not just how much cash it has or what its position is on a given date. The cash flow statement tracks cash inflows and outflows, which can differ from profit due to timing. The balance sheet shows assets, liabilities and equity at a single point in time. A list of liabilities isn’t a standard statement and doesn’t indicate profitability. So the Profit and Loss Account is the best choice for measuring profitability over a year or longer.