Practice Quiz

Financial Planner

Category - General Principles of Financial Planning

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In the statement of owner’s equity, owner’s equity or capital is calculated using:
  1. Gross income
  2. The positive or negative cash flow figure from the statement of cash flows
  3. Assets
  4. Total income from operating activities
  5. Net income
Explanation
Answer: E - Owner’s equity is calculated using net income when preparing the statement of owner’s equity.

Key Takeaway: The statement of owner’s equity includes beginning capital, investments made into the business, net income, and owner’s withdrawals to determine the ending owner’s equity.
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