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What is the difference between balance sheet and profit and
loss account?
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Answer Posted / james e
Balancesheet-it’s a financial statement that summarises a
company’s assets, liabilities, and shareholders’ equity at
a specific point in time. Most balance sheets are produced
quarterly although some farm firms use an annual balance
sheet. Any firm with annual sales greater than $200,000
should use the quarterly system because the firm needs more
frequent information on its financial structure than is
supplied annually. Also called statement of financial
condition, statement of financial position.It's called a
balance sheet because the two sides balance out. This makes
sense: a company has to pay for all the things it has
(assets) by either borrowing money (liabilities) or getting
it from shareholders (shareholders' equity).
The balance sheet must follow the following formula:
Assets = Liabilities + Shareholders' Equity
Profit and loss account is A statement showing the
revenues, expenses, and income (the difference between
revenues and expenses) of a corporation over some period of
time. shows the revenues from business operations, expenses
of operating the business, and the resulting net profit or
loss of a company over a specific period of time.
Its a business financial statement that lists revenues,
expenses, and net income throughout a given period. Also
called earnings report, earnings statement, operating
statement.It begins with an entry for revenue and subtracts
from revenue the costs of running the business, including
cost of goods sold, operating expenses, tax expense and
interest expense. The bottom line (literally and
figuratively) is net income (profit).
In assessing the overall financial condition of a company,
you'll want to look at the income statement and the balance
sheet together, as the income statement captures the
company's operating performance and the balance sheet shows
its net worth.
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outstanding expenses are the expenses that "unpaid"at the end of the accounting period e.g.salaries rent so they all come to under nominal accounts which is debt all expenses and losses and credit all gains since they are unpaid hence they must be credited
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