A balance sheet displays which of the following?

• A. The company's total assets and how those assets are financed
• B. The company's net income for the period
• C. The company's market share
• D. The company's cash flow from financing activities

Answer: (A)

A balance sheet shows the company’s financial position at a specific point in time by detailing its total assets and the sources of financing for those assets. It reflects the fundamental idea that assets are funded either by what the company owes (liabilities) or by the owners’ claims (equity). So you see assets listed, then liabilities and equity that balance with those assets, illustrating the equation: Assets = Liabilities + Equity. Examples include cash, accounts receivable, equipment as assets; loans payable or accounts payable as liabilities; and owner’s capital or retained earnings as equity. Net income belongs on the income statement, not the balance sheet, and cash flow from financing activities appears on the cash flow statement, not the balance sheet.