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Whats the difference between a profit and loss account sheet and a balance sheet?
Differene between Profit and loss account and Balance sheet
- Thread starter harriett123
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The balance sheet lists the assets the organization has and - also - lists where they came from - such as what is owed to others (liabilities ) and what the organization has invested in the company (equity). This is a very rough description but its a start)
The profit and loss sheet lists how much the organization has earned so far this period (usually a year) - which is termed REVENUE and how much it has spent to do so (termed EXPENSES) . then it shows the net of the revenue less expenses. If revenue > expense then you have a net profit, if revenue < expense then you have a net loss.
Hope this helps!
The profit and loss sheet lists how much the organization has earned so far this period (usually a year) - which is termed REVENUE and how much it has spent to do so (termed EXPENSES) . then it shows the net of the revenue less expenses. If revenue > expense then you have a net profit, if revenue < expense then you have a net loss.
Hope this helps!
=> Profit and loss account indicates the performance of the company while balance sheet
show the worth of the company.
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The balance sheet is a snapshot of the businesses financial position on a specific day in time. The balance sheet is also the accounting equation: assets = liabilities + owners' equity.
The income statement or profit and loss statement is a representation of the businesses income over a period of time. In it's most simplest form, the income statement is revenues - expenses = net income. Keep in mind that the income statement is representative of revenues earned and expenses incurred. Under the accrual basis of accounting revenues are recorded when earned, not necessarily when received (revenue recognition principle); expenses are recorded when incurred, not necessarily when paid (matching principle).
I have multiple accounting videos on my website including accompanying lecture notes that you may find helpful... TheAccountingDr dot com. Also, like me on facebook dot com / TheAccountingDoctor and post any questions you may have. I would be more than happy to try and help.
Good luck!
The income statement or profit and loss statement is a representation of the businesses income over a period of time. In it's most simplest form, the income statement is revenues - expenses = net income. Keep in mind that the income statement is representative of revenues earned and expenses incurred. Under the accrual basis of accounting revenues are recorded when earned, not necessarily when received (revenue recognition principle); expenses are recorded when incurred, not necessarily when paid (matching principle).
I have multiple accounting videos on my website including accompanying lecture notes that you may find helpful... TheAccountingDr dot com. Also, like me on facebook dot com / TheAccountingDoctor and post any questions you may have. I would be more than happy to try and help.
Good luck!