What is a balance sheet?

• A. A forecast of future revenue
• B. A snapshot of financial position; assets, liabilities, and equity
• C. A projection of future profits
• D. A summary of cash inflows and outflows

Answer: (D)

A balance sheet provides a snapshot of a company’s financial position at a specific date. It shows three parts: assets (what the company owns), liabilities (what it owes), and equity (the owners’ claim after liabilities). The numbers must balance, following the equation Assets = Liabilities + Equity, giving a clear picture of resources and obligations at that moment. This is different from forecasts or projections of revenue or profits, which look ahead over a period, and from a cash flow summary, which tracks cash in and out over time.