What is the main purpose of a statement of capital?

The main purpose of a statement of capital is to show the owner's withdrawals and investments in a business. This financial statement provides a detailed breakdown of how much capital the owner has contributed to the business and how much has been taken out over a specific period. It reflects changes in the owner's equity, which is crucial for understanding the financial health of the business from the owner's perspective.

By documenting the investments made and withdrawals taken by the owner, this statement helps track how the contributions and distributions affect the overall capitalization of the business. This is particularly important for sole proprietorships and partnerships, as it directly relates to the owners' equity stake in the business. The focus on owner activity regarding capital allows for transparency in how capital is managed, which is critical for financial accountability and planning.

The other options focus on different financial aspects. Determining total revenues, summarizing market performance, and analyzing trends in expenses do not relate specifically to the owner's equity changes, making them less relevant in the context of the statement of capital.