Which one of the following statements regarding financial reports is correct?

The balance sheet classifies all assets according to operating, investing, and financing activities.

The statement of cash flows shows cash inflows and outflows from operating activities only.

The income statement is used to show that a company's resources equal claims to those resources.

The statement of stockholders' equity updates the balances of common stock and retained earnings for related transactions during the year.

The correct answer is letter "D": The statement of stockholders' equity updates the balances of common stock and retained earnings for related transactions during the year.

Explanation:

Stockholders' equity is the equity held by the shareholders in a company. It is determined by subtracting the total liabilities from the total assets. The result can be seen on the Balance Sheet. Stockholders' equity comes from the capital that was originally invested in a business, and later new investments made plus the earnings that the company can retain.

Retained Earnings continue to be the largest component of Stockholders' Equity for older firms and are adjusted along with the common stock balance in line with the relevant transactions made by the companies during the accounting period.

The answer is D.

Explanation:

Out of all the options option D (The statement of stockholders' equity updates the balances of common stock and retained earnings for related transactions during the year) is correct. This statement shows changes in the equity position between beginning of the year and the ending balance.

Statement of Cash flow contains operating activities, investing and financing activities.

Balance sheet contains asset, liability and equity