Balance Sheet vs Profit & Loss Account

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.

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 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.

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