What does a balance sheet report?

A balance sheet is a crucial financial statement that provides a snapshot of a company's financial position at a specific point in time. It reports three main components: assets, liabilities, and equity.

Assets represent everything the company owns that has value, such as cash, inventory, property, and equipment. Liabilities are what the company owes to outside parties, including loans and accounts payable. Equity reflects the ownership interest in the company, which is calculated as the difference between assets and liabilities.

This relationship helps stakeholders understand the financial health of the company, assess its ability to meet obligations, and evaluate its net worth. Therefore, option A accurately defines the purpose of a balance sheet, as it encapsulates the essence of what this statement conveys in the context of accounting.