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.
What is Profit and Loss Account?
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.
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Balance Sheet |
Profit & Loss Account |
| Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â 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. |
| Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â What exactly is it? | |
| Balance Sheet is a statement | P & L Account is an account |
| Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â 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 |
| Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â 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 |
| Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â 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 |
| Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â 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.
| Important topics on Balance Sheet: |
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