Difference Between Balance Sheet and Profit & Loss Account (2024)
A Balance sheet is a precise representation of the assets, equity and liabilities of the entity. This is outlined by every enterprise, a partnership enterprise or sole proprietorship firm. It reveals the financial security of the enterprise.
There are 2 titles in a Balance Sheet. Namely – assets (inventory, accounts receivable), equity (share capital, capital surplus) and liability (accounts payable, customer deposits). The liabilities title will cover the shareholder’s equity and all the current and non-current liabilities and all the current assets and the non-current assets of the enterprise are met whilst the equity.
P&L a/c which also called a statement of revenue and expenses or an income statement. The account depicts the financial production of the enterprise in a specific time.
This article is a ready reckoner for all the students to learn the difference between the Balance Sheet and Profit & Loss Account.
Balance Sheet
Profit & Loss Account
Definition
A Balance sheet is a precise representation of the assets, equity and liabilities of the entity. This is outlined by every enterprise, a partnership enterprise or sole proprietorship firm. It reveals the financial security of the enterprise.
P&L a/c which also called a statement of revenue and expenses or an income statement. The account depicts the financial production of the enterprise in a specific time.
What exactly is it?
Balance Sheet is a statement
P & L Account is an account
State of accounts
Accounts added in balance sheet maintain their identity and are carried forward for the next accounting period
Accounts that get transferred to P & L account are closed and do not retain their identity
What does it represent?
It represents the financial state of the business concern at a particular date
It represents the profit earned or the loss incurred by a business concern during an accounting period
What does it disclose?
Capital of shareholders and the various assets and liabilities of the business
The gains and losses along with various incomes and indirect expenses taking place in the business during the accounting period
Order of creation
Balance sheet is prepared after creating the P & L Account
P & L Account is prepared before creating the balance sheet
The above mentioned is the concept, that is elucidated in detail about ‘Difference between Balance Sheet and Profit & Loss Account’ for the Commerce students. To know more, stay tuned to BYJU’S.
The balance sheet shows your company's financial position on a specific date, such as December 31, 2023. The profit and loss
loss
Economic loss is a term of art which refers to financial loss and damage suffered by a person which is seen only on a balance sheet and not as physical injury to person or property.
https://en.wikipedia.org › wiki › Pure_economic_loss
The Balance Sheet reveals the entity's financial position, whereas the Profit and Loss account discloses the entity's financial performance. A Balance Sheet gives an overview of the assets, equity, and liabilities of the company, but the Profit and Loss Account is a depiction of the entity's revenue and expenses.
Scope of Information: The GL report provides a comprehensive, transaction-level view of all financial activities, whereas the P&L report presents a summarized view of revenues, expenses, and profits for a specific period.
The Balance Sheet report shows net income for current fiscal year and it should match the net income on the Profit & Loss report for current fiscal year.
The balance sheet—as opposed to the P&L, which shows results over a defined period of time—provides a "snapshot" of the business's performance as of a given date. The balance sheet not only includes the business's assets and liabilities, but also the owner's equity in the business, as well as any long-term investments.
The main difference is that the balance sheet yields information regarding a company's assets, liabilities, and shareholders' equity, while the profit and loss statement summarizes information about revenues, and expenses.
The balance sheet contains everything that wasn't detailed on the income statement and shows you the financial status of your business. But the income statement needs to be tallied first because the numbers on that doc show the company's profit and loss, which are needed to show your equity.
“A general ledger (GL) is a parent copy of all the financial transactions of a business. All other necessary accounting formats seek information from a GL. A balance sheet is an accounting tool that presents financial and accounting data related to assets, liabilities and equity.”
The main difference between general ledger and subledger is that the general ledger contains all accounting transactions, whereas the subledger records transactions of intermediary sets of accounts.
Owning vs Performing: A balance sheet reports what a company owns at a specific date.An income statement reports how a company performed during a specific period. What's Reported: A balance sheet reports assets, liabilities and equity. An income statement reports revenue and expenses.
The P&L and balance sheet are interconnected via the equity account in the balance sheet. Any debit or credit to a P&L account will instantly impact the balance sheet through being booked on the retained earnings line.
Here's the main one: The balance sheet reports the assets, liabilities, and shareholder equity at a specific point in time, while a P&L statement summarizes a company's revenues, costs, and expenses during a specific period.
The profit and loss (P&L) account summarises a business' trading transactions - income, sales and expenditure - and the resulting profit or loss for a given period. The balance sheet, by comparison, provides a financial snapshot at a given moment.
A balance sheet will provide you a quick snapshot of your business's finances - typically at a quarter- or year-end—and provide insights into how much cash or how much debt your company has.
The income statement illustrates the profitability of a company under accrual accounting rules. The balance sheet shows a company's assets, liabilities, and shareholders' equity at a particular point in time. The cash flow statement shows cash movements from operating, investing, and financing activities.
A profit and loss account will include your credits (which includes turnover and other income) and deduct your debits (which includes allowances, cost of sales and overheads). These are used to find your bottom line figure – either your net profit or your net loss.
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