Final answer:
The balance sheet reports a company's assets, liabilities, and stockholders' equity. It is a financial statement showing what the company owns and owes, and the net ownership value. For banks, it includes unique items such as cash reserves, loans, and government securities.
Step-by-step explanation:
The balance sheet is a fundamental financial statement that reports a company's assets, liabilities, and stockholders' equity. An asset represents something of value owned by the company that can be used for production or operations. A liability, conversely, is a debt or obligation that the company owes. The term 'stockholders' equity' refers to the net worth of the company which is calculated as total assets minus total liabilities and represents the owners' claims to the assets after all liabilities are paid off.
A bank's balance sheet operates similarly but includes specific items such as cash in vaults, reserves held at the Federal Reserve, loans made to customers, and government securities. The balance on a bank's T-account must always equal the sum of its liabilities and net worth to zero out. Net worth, which is also considered bank capital, indicates the overall health of the financial institution - being positive for a healthy business and negative for a bankrupt entity.
Therefore, the correct answer to the student's question is: The balance sheet a. reports the assets, liabilities, and stockholders' equity of a company.