What does a balance sheet display?

A balance sheet provides a snapshot of a company’s financial position at a specific point in time. It categorizes a company’s assets, liabilities, and shareholders’ equity into three main groups, which give a clear picture of what the company owns (assets), what it owes (liabilities), and the residual interest of the owners (equity). This structure allows stakeholders to assess the financial health of the company and its ability to meet its obligations.

In contrast, a summary of income and expenses would be reflected in an income statement, which details revenues and expenditures over a period of time, rather than at a specific point. Future cash flow predictions are typically found in cash flow forecasts or projected financial statements, not in the balance sheet. Comparative financial statements offer a way to view financial data side-by-side across different periods but are not a characteristic of any single balance sheet. Therefore, the characterization of the balance sheet as displaying three groups of accounts at a specific point in time is accurate and illustrates its essential purpose in financial reporting.