A balance sheet, or otherwise known as a position statement. It is a statement which shows the financial position of the company on a specific date. It lists all the Ownership, i.e. assets and Owings, i.e. liabilities of the company. A profit and loss account, on the other hand, is an account that shows the revenue earned and expenses sustained by the company, during the course of business, in a financial year.
These two along with the cash flow statement constitute the financial statement. It is helpful to all the stakeholders in ascertaining the financial position, profitability, and performance of the enterprise.
In this post, we have elaborated on the differences between balance sheet and profit and loss account.
|Meaning||A balance sheet is a statement that discloses the financial position of its assets, liabilities and capital on a specific date.||A profit and loss account is an account that shows the revenue and expenses of the firm from business operations during a financial year.|
|What is it?||Statement||Account|
|Represents||The financial position of the business on a particular date.||Profit earned or loss suffered by the business for the accounting period.|
|Preparation||Prepared at the end of the financial year.||Prepared for the financial year.|
|Information Disclosed||Assets, liabilities, and capital of shareholders.||Income, expenses, gains and losses.|
|Sequence||It is prepared after the preparation of the Profit and Loss Account.||It is prepared before the preparation of the Balance Sheet.|