Final answer:
The balance of the Pension Asset/Liability reflects the funded status of the pension plan, which is the actual condition of the plan's finances when measured against obligations. It falls under similar principles as a T-account on a balance sheet, where assets counterbalance liabilities and equity.
Step-by-step explanation:
The balance of the Pension Asset/Liability column in the pension worksheet reflects the funded status of the pension plan, which is the difference between the value of the plan assets and the obligations to employees (benefits owed). Essentially, the funded status indicates if there is a surplus or a deficit. When referencing a T-account, which is a basic form of a balance sheet with a two-column format for tracking debits and credits, pensions also follow a similar principle where assets must balance out with liabilities and equity.
In the case of the Pension Asset/Liability, the correct answer to the student's question would be (c) the funded status of the plan. This is because neither the balance of the Projected Benefit Obligation (PBO) nor the balance of the Accumulated Pension Obligation (APO) alone determines the pension asset or liability. It is determined by assessing the net value of plan assets against the PBO or APO, which shows the pension's funded status.
Therefore, when considering pension worksheets within the context of accounting and the functions of a balance sheet, it's important to understand that the Pension Asset/Liability represents this net position—the financial health or status of the pension fund.