Which one of the following statements concerning the balance sheet is correct?

• A. The balance sheet is prepared on a quarterly basis only.
• B. The balance sheet includes only cash transactions.
• C. The balance sheet reports a company's financial position at a specific point in time.
• D. The balance sheet shows only the revenues and expenses for a period.

Answer: (C)

Verified step by step guidance

1. Understand the purpose of the balance sheet: The 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 equity, not just cash transactions or revenues and expenses.
2. Clarify the frequency of preparation: The balance sheet is not limited to quarterly preparation. It can be prepared at any point in time, such as monthly, quarterly, or annually, depending on the company's reporting needs.
3. Distinguish between cash transactions and the balance sheet: The balance sheet includes all assets, liabilities, and equity, not just cash transactions. It reflects the overall financial position, including non-cash items like accounts receivable, inventory, and fixed assets.
4. Differentiate the balance sheet from the income statement: The balance sheet does not show revenues and expenses for a period. Instead, it reports the financial position at a specific date, while the income statement focuses on revenues and expenses over a period of time.
5. Conclude with the correct statement: The correct statement is that the balance sheet reports a company's financial position at a specific point in time. This aligns with the fundamental purpose of the balance sheet in financial accounting.