Canadian Securities Course (CSC) Level 1 Practice Exam

What is the purpose of the statement of changes in equity?

1. Used to track day-to-day expenses

2. Shows a company's long-term investments

3. Records changes to each component of equity

4. Measures a company's revenue growth

The correct answer is: Records changes to each component of equity

The correct answer is C. The statement of changes in equity is used to record changes to each component of equity over a specific period. It provides details on how equity has changed through activities such as net income, dividends, and any other transactions affecting equity. This statement helps stakeholders understand the movements in the various components of equity, such as share capital, retained earnings, and any other reserves. Options A, B, and D are incorrect because the statement of changes in equity is not used to track day-to-day expenses, show long-term investments, or measure revenue growth. Instead, its primary purpose is to demonstrate the changes in equity accounts over a defined period.