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Presented below is the unaudited balance sheet as of December 31, Year 2, as prepared by the bookkeeper of Zed Manufacturing Corp., a firm not required to report under federal securities law.

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Final answer:

A balance sheet is an accounting tool that lists assets and liabilities. A bank's balance sheet operates by listing its assets, liabilities, and net worth, which is also called bank capital.

Step-by-step explanation:

A balance sheet is an accounting tool that lists assets and liabilities. An asset is something of value that you own and can use to produce something. A liability is a debt or something you owe. A bank's balance sheet operates in much the same way, listing assets such as cash, reserves, loans, and bonds, as well as liabilities like deposits. The net worth of a bank is calculated by subtracting the liabilities from the assets, and is also known as bank capital.

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