Essay On Difference Between An Income Statement And A Balance Sheet

There are various differences between an income statement and a balance sheet. As a matter of fact, the difference can be focused on purpose, time period covered, as well as the subject. By definition and income statement is a financial statement that defines and measures the financial performance of the company in a specific period of time. In fact, an income statement is one of the three financial statements in an organization. On the other hand, a balance sheet is another type of financial statement that shows various financial balances. It is a snapshot of the financial condition of a company.
The income statement and balance sheet are forms of financial statements, but they differ in terms of purpose. Perhaps, income statement gives a description of the current year performance while the balance sheet gives an overall description of the company since the business began in the current year. The income statement is used in an organization to give a report on their financial performance, which is tracked over a period of time.
In terms of the period covered, the balance sheet and income statement differ. It is worth noting that a balance sheet relates to information to a given point and specific date within a certain accounting cycle. On the other hand, income statement focuses on a particular period of time in the accounting cycle. In addition, the subject is also a point of difference between an income statement and balance sheet. Certainly, the balance sheet shows assets and liabilities to the lenders, business owners, as well as investors, while the income statement demonstrates the flow of sales and its potential in covering the expenses in order to determine losses or profit. The balance sheet shows liabilities, assets, and capital, the income statement contains all the losses and profits of the company, which is used to obtain a net profit or loss.