Which financial statement summarizes what a company owns and owes on a particular date?

• A. Statement of Cash Flows
• B. Balance Sheet
• C. Income Statement
• D. Statement of Retained Earnings

Answer: (B)

Verified step by step guidance

1. Understand the purpose of each financial statement: The Statement of Cash Flows shows cash inflows and outflows over a period, the Income Statement reports revenues and expenses over a period, the Statement of Retained Earnings explains changes in retained earnings, and the Balance Sheet summarizes assets, liabilities, and equity at a specific point in time.
2. Recognize that the Balance Sheet is the financial statement that provides a snapshot of what a company owns (assets) and owes (liabilities) on a particular date.
3. Recall the accounting equation: Assets = Liabilities + Equity. This equation is the foundation of the Balance Sheet and helps organize the information presented.
4. Identify the key components of the Balance Sheet: Assets (current and non-current), Liabilities (current and non-current), and Equity (owner's equity or shareholder's equity). These categories are essential for understanding the financial position of the company.
5. Conclude that the Balance Sheet is the correct answer because it summarizes the company's financial position, including what it owns and owes, on a specific date.