Balance Sheet

The correct answer is option D, which states that a balance sheet is a list of assets, liabilities, and capital of a business at a certain date. In this response, we will explain why this option is the most accurate description of a balance sheet.

Definition
A balance sheet is a financial statement that provides a snapshot of a business's financial position at a specific point in time. It presents a summary of what a business owns (assets), what it owes (liabilities), and the ownership interest in the business (capital or equity).

Components of a Balance Sheet
A balance sheet is divided into three main sections: assets, liabilities, and equity. Let's discuss each of these components in detail:

1. Assets: Assets represent the resources owned by a business that have economic value and can be measured in monetary terms. They can be further classified into current assets (e.g., cash, accounts receivable) and non-current assets (e.g., property, plant, and equipment).

2. Liabilities: Liabilities are the obligations or debts that a business owes to external parties. They can be classified into current liabilities (e.g., accounts payable, short-term loans) and non-current liabilities (e.g., long-term loans, mortgages).

3. Equity: Equity represents the owner's interest in the business. It is calculated by subtracting total liabilities from total assets. Equity can be further divided into contributed capital (e.g., capital invested by shareholders) and retained earnings (e.g., accumulated profits).

Purpose of a Balance Sheet
The balance sheet provides important information about a business's financial health and its ability to meet its financial obligations. It helps stakeholders, such as investors, creditors, and management, in assessing the financial position, liquidity, and solvency of the business.

Key Features of a Balance Sheet
- The balance sheet follows the accounting equation: Assets = Liabilities + Equity. This equation must always be in balance.
- It is prepared as of a specific date, usually the end of an accounting period, such as a fiscal year-end.
- The assets and liabilities are presented in order of their liquidity, with current assets and liabilities listed first.

Conclusion
In summary, a balance sheet is a financial statement that provides a snapshot of a business's financial position at a specific point in time. It lists the assets, liabilities, and equity of a business and is an essential tool for analyzing the financial health and performance of a company.