Final answer:
The financial statement showing a firm's financial position at a specific point in time is the balance sheet. It employs a T-account format to differentiate between a company's assets on one side and its liabilities on the other, with the company's net worth being the difference between the two.
Step-by-step explanation:
The financial statement that displays a firm's financial position on a particular date is the balance sheet. The balance sheet, also associated with a T-account, is a crucial accounting tool that exhibits a company's financial standing by listing its assets and liabilities in a two-column format. This T-shape is formed by a vertical line down the middle and a horizontal line under the column headings for "Assets" and "Liabilities", providing a clear visual representation of the firm's financial health.
Assets are the valuable items that a company owns and can utilize to generate revenue, such as cash, inventory, and property. On the other side of the balance sheet, liabilities represent the debts or obligations the company owes, like loans or accounts payable. The difference between the total assets and total liabilities is known as the net worth or equity of the company.
For example, if a business owns a building (an asset), but it still has a mortgage on it (a liability), the net worth would be the building's value minus the mortgage amount. Similarly, a bank's balance sheet would also list assets like cash in vaults or reserves held at the Federal Reserve and liabilities like customer deposits, with the bank's net worth being referred to as bank capital.