What is the purpose of a balance sheet?

A balance sheet serves the essential function of providing a snapshot of a company's financial position at a specific point in time. This financial statement encapsulates the company's assets, liabilities, and equity, offering a clear view of what the company owns versus what it owes. By presenting this information cohesively, stakeholders can assess the overall financial health of the business, evaluate its liquidity and solvency, and make informed decisions regarding financing, investments, or strategic planning.

In contrast, the other options highlight different financial statements or concepts. Listing all financial transactions relates more closely to a general ledger or journal, which captures the detailed record of all transactions rather than summarizing the financial position. Summarizing cash flows over a period pertains to the cash flow statement, focusing on the movement of cash in and out of the company rather than its financial position at a specific moment. Projecting future earning potentials relates to forecasting and planning activities that are based on historical data, but this is not the primary function of a balance sheet. Thus, the balance sheet's role is distinct and focused on providing a momentary view of financial stability and structure.