Difference Between Income Statement and Balance Sheet

An Income statement and a Balance sheet are two very important financial statements in accounting, both statements have their own individual purpose and identity. They are important, yet very different. Below, you will find few points showing the difference between income statement and balance sheet.

 

Income Statement (Profit and Loss Account)

1. The income statement is an important final account of a business which shows the summarized view of revenues and expenses of a particular accounting period.

2. Income statement is prepared for an entire accounting period.

3. Accounts that are transferred to the income statement are closed.

4. Income statement shows how profits/gains are earned and expenses/losses are incurred.

5. It consists of income and expenses.

6. The balance of account is transferred to capital account in the balance sheet.


 

Balance Sheet

1. The balance sheet is a statement that shows detailed listing of assets, liabilities and capital showing the financial condition of a company on a given date.

2. Balance sheet is prepared on the last day of the accounting period.

3. Accounts that are transferred to the balance sheet are not closed.

4. Balance sheet, on the other hand, shows the financial position of a business.

5. It consists of assets, liabilities and capital.

6. The balance derived from a balance sheet is transferred to the capital account.

6. The balance of statement becomes opening balance for the next period.