Final answer:
The income statement does not measure a company's financial position, which is instead reflected in the balance sheet. A balance sheet uses T-accounts to list a company's assets, liabilities, and net worth at a specific point, showing the financial health of the company.
Step-by-step explanation:
The statement that the income statement measures the company's financial position at the end of the year is false. The correct tool for assessing a company's financial position at any given point is the balance sheet. The income statement, on the other hand, reports a company's financial performance over a specific period, typically a year or a quarter, by summarizing its revenues and expenses to calculate the net income or loss.
A T-account is a visual representation that helps to understand the balance sheet better. The 'T' divides the assets of a firm, displayed on the left, from its liabilities and net worth (or equity), shown on the right. On a bank's T-account, assets include cash reserves, loans made, and securities purchased, while liabilities encompass deposits and other debts owed. Net worth, also called bank capital, represents the difference between total assets and liabilities and appears on the liabilities side to keep the account balanced.
To assess a bank's financial health, one would examine its balance sheet, which lists assets, liabilities, and net worth. It is on the balance sheet that one can determine a firm's net worth, and whether it is in a healthy financial state with a positive net worth or is facing bankruptcy with a negative net worth.