In financial accounting, a balance sheet provides which of the following?

• A. A detailed schedule showing changes in retained earnings and dividends declared over a period of time
• B. A snapshot of a company’s assets, liabilities, and shareholders’ equity at a specific point in time
• C. A summary of revenues and expenses that results in net income for a period of time
• D. A report of cash inflows and outflows from operating, investing, and financing activities for a period of time

Answer: (B)

Verified step by step guidance

1. Understand the purpose of a balance sheet in financial accounting: it is designed to present the financial position of a company at a specific point in time.
2. Recognize the three main components of a balance sheet: assets, liabilities, and shareholders' equity.
3. Recall that assets represent what the company owns, liabilities represent what the company owes, and shareholders' equity represents the owners' residual interest in the company.
4. Differentiate the balance sheet from other financial statements: the income statement summarizes revenues and expenses over a period, the statement of retained earnings shows changes in equity, and the cash flow statement reports cash inflows and outflows.
5. Conclude that the balance sheet provides a snapshot of a company’s financial position by listing assets, liabilities, and shareholders’ equity at a specific date.