What is the primary purpose of the Statement of Shareholders' Equity?

The primary purpose of the Statement of Shareholders' Equity is to reflect changes in the equity section of the balance sheet. This financial statement provides a detailed account of the equity transactions that have occurred during a specific period, including contributions from shareholders, retained earnings, dividends declared, and any other comprehensive income. It effectively shows how the total equity of the shareholders has changed due to various activities, such as issuing new shares or repurchasing existing shares, as well as how profits have been reinvested or distributed to shareholders.

This statement is crucial for stakeholders as it offers insights into the financial health of the company and the ongoing relationship between the company and its shareholders. By summarizing these changes, it complements the balance sheet and provides a clearer view of the company's capital structure and distribution of profits, making it easier to understand how shareholder interests are being managed over time.

In contrast, the other options pertain to different aspects of financial reporting. While profitability works is measured by the income statement, liquidity and cash flow assessments are typically found in the statement of cash flows, and recording revenues and expenses is the focus of the income statement. Therefore, the Statement of Shareholders' Equity stands out for its specific focus on equity transactions and their impact on shareholder value