The balance sheet -
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A. B. C. D. E.D
The balance sheet reports the categories and amounts of assets, liabilities, and stockholders' equity at specific points in time.
The correct answer is D. The balance sheet reports the firm resources, claims on those resources, and stockholders' equity at specific points in time.
The balance sheet is one of the key financial statements that provides a snapshot of a company's financial position at a specific date. It presents information about the firm's resources (assets), claims on those resources (liabilities), and the residual value available to stockholders (stockholders' equity) at a given point in time.
Here's a breakdown of the components of the balance sheet:
Assets: These are the economic resources owned or controlled by the company. Assets can be categorized into two main types: current assets and non-current assets. Current assets include cash, accounts receivable, inventory, and short-term investments, among others. Non-current assets include property, plant, and equipment, long-term investments, and intangible assets like patents and trademarks.
Liabilities: These represent the company's obligations or debts to external parties. Similar to assets, liabilities can be classified as current liabilities or long-term liabilities. Current liabilities include accounts payable, short-term loans, and accrued expenses, while long-term liabilities consist of long-term debt and deferred tax liabilities, for example.
Stockholders' Equity: Also referred to as shareholders' equity or owners' equity, this section represents the residual interest in the company's assets after deducting liabilities. Stockholders' equity includes various components such as share capital (common stock), additional paid-in capital, retained earnings, and accumulated other comprehensive income.
The balance sheet follows the fundamental accounting equation: Assets = Liabilities + Stockholders' Equity. It presents a snapshot of the company's financial health and provides valuable information about its liquidity, solvency, and overall financial stability.
To summarize, the balance sheet reports the firm's resources (assets), claims on those resources (liabilities), and stockholders' equity at a specific point in time. It does not provide information about cash inflows or how cash was used (option A), show the change in the financial position of a firm (option B), report specifically how resources were used (option C), or solely report the assets and liabilities for the accounting period (option E).