Which of the following best describes the purpose of the balance sheet?
A) To summarise assets and liabilities for the accounting period
B) To report the inflows and outflows of cash
C) To balance current period revenues with those of the previous period
D) To report assets, liabilities and owners' equity as of a specific date

Question

Quizplus · Accepted Answer

The purpose of the balance sheet is to report the financial position of the company as of a specific date by summarizing its assets, liabilities, and owners' equity. It shows what a company owns (assets), what it owes (liabilities), and what the owners have invested in the business (owners' equity). Option A is partially correct but lacks the specific time frame of the financial position being reported. Option B describes the purpose of the cash flow statement, not the balance sheet. Option C is incorrect as the balance sheet does not report on revenues.

Which of the Following Best Describes the Purpose of the Balance