Which of the following statements about the balance sheet is correct?

• A. Assets, liabilities, and equity are all reported on the balance sheet.
• B. Total liabilities can exceed total assets in some cases.
• C. Equity is not part of the balance sheet.
• D. Only current assets are listed.

Answer: (A)

The balance sheet presents assets, liabilities, and equity, and it rests on the accounting equation that assets equal liabilities plus equity. This means the balance sheet must show all three categories, because they together reflect the company’s financial position at a specific date.

That’s why the statement that assets, liabilities, and equity are all reported is the correct one. It aligns with the idea that what the company owns (assets) is funded by what it owes (liabilities) and by the owners’ claim (equity).

If liabilities were greater than assets, equity would have to be negative to balance the equation, which is not the standard representation and signals insolvency rather than a normal balance sheet presentation. The claim that equity isn’t part of the balance sheet is false, since equity is a key section. The claim that only current assets are listed is also false, because both current and noncurrent assets appear on the balance sheet.