Which of the following best describes a balance sheet?
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A. B. C. D. E.C
A balance sheet provides a detailed listing of a company's assets, liabilities, and equity at a point in time. This provides a glimpse at a company's financial condition.
The correct answer is C. A balance sheet summarizes the financial position of a company at a given point in time.
A balance sheet is one of the financial statements that provides a snapshot of a company's financial position at a specific date. It presents the company's assets, liabilities, and shareholders' equity. The balance sheet follows the fundamental accounting equation, which states that assets equal liabilities plus shareholders' equity.
Here's a breakdown of the components of a balance sheet:
Assets: These represent what the company owns and include both current assets (those expected to be converted into cash within a year) and long-term assets (those held for more than a year). Examples of assets include cash, accounts receivable, inventory, property, plant, and equipment.
Liabilities: These represent what the company owes to external parties and include both current liabilities (obligations due within a year) and long-term liabilities (obligations due after one year). Examples of liabilities include accounts payable, loans, bonds, and accrued expenses.
Shareholders' Equity: This represents the residual interest in the company's assets after deducting liabilities. It includes common stock, retained earnings, and additional paid-in capital. Shareholders' equity represents the ownership interest of the company's shareholders.
The balance sheet provides important information about a company's financial health and its ability to meet its short-term and long-term obligations. It allows investors, creditors, and other stakeholders to assess the company's liquidity, solvency, and overall financial stability.
To summarize, a balance sheet is a financial statement that presents a snapshot of a company's financial position at a specific point in time by summarizing its assets, liabilities, and shareholders' equity. Answer choice C accurately describes this purpose, making it the correct option.