Question : ___________ is a financial statement that shows a company's assets, liabilities, and shareholders' equity at a specific point in time.
Option 1: Income statement
Option 2: Balance sheet
Option 3: Cash flow statement
Option 4: Statement of retained earnings
Correct Answer: Balance sheet
Solution : The correct answer is (b) Balance sheet.
A balance sheet is a financial statement that provides a snapshot of a company's financial position at a specific point in time, typically the end of a reporting period such as a fiscal quarter or year. It presents a summary of a company's assets, liabilities, and shareholders' equity.
The balance sheet follows the fundamental accounting equation: Assets = Liabilities + Shareholders' Equity. It provides a detailed breakdown of the company's resources (assets), obligations (liabilities), and the residual interest of shareholders (shareholders' equity) in the business.
The balance sheet includes various categories of assets, such as cash, accounts receivable, inventory, property, plant, and equipment. Liabilities may include accounts payable, loans, accrued expenses, and other obligations. Shareholders' equity represents the owners' stake in the company and includes components like retained earnings and capital contributions.
Option a) Income statement (also known as a profit and loss statement or statement of earnings) provides information about a company's revenues, expenses, and net income over a specific period. It shows the company's financial performance, but it does not provide information about the company's financial position at a specific point in time.
