A balance sheet reflects a firm's:

• A. owner's equity changes over a period
• B. revenues and expenses over a period of time
• C. financial position at a specific point in time
• D. cash inflows and outflows during a period

Answer: (C)

Verified step by step guidance

1. Understand the purpose of a 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. It includes assets, liabilities, and owner's equity.
2. Clarify the difference between a balance sheet and other financial statements: Unlike the income statement (which shows revenues and expenses over a period) or the cash flow statement (which shows cash inflows and outflows during a period), the balance sheet focuses on a single moment in time.
3. Identify the components of a balance sheet: The balance sheet is divided into three main sections: assets (resources owned by the company), liabilities (obligations owed by the company), and owner's equity (the residual interest in the assets after deducting liabilities).
4. Relate the balance sheet to the accounting equation: The balance sheet is based on the fundamental accounting equation: \( \text{Assets} = \text{Liabilities} + \text{Owner's Equity} \). This equation ensures that the balance sheet is balanced.
5. Conclude the correct interpretation: The balance sheet reflects the financial position of a firm at a specific point in time, summarizing what the company owns, owes, and the equity held by owners.