Income statement and balance sheet are some of the financial records that are very important for any company. These two records are very similar in many ways and they are usually all considered by any stakeholder willing to deal with a certain company. However, the two financial records are different in many ways (Warren, 2012). This research paper will contrast the information found in balance sheet and income statements.
It will be noted that the balance sheet is prepared to show the financial position of a given company as at the date when it is prepared. On the other hand, the income statement shows the performance of a company for a given financial year. What this means is that the information in a balance sheet relates to accumulation of assets by the company since it was started. On the other hand, the information in income statement shows information collected within a given financial year.
Assets= capital +liabilities (Kravitz, 1999).
Generally, the balance sheet shows the resources owned by the organization and their source. The resources could be from the owners of the organization or financed by the creditors. On the other hand, the income statement is prepared using the equation;
Profit (loss)= revenue –expenses.
The income statement shows the income (revenue) generated in a given financial year and the expense incurred in the process of generating the revenue. If the expenses are more than the revenue, then the organization makes also but if the revenues are more, then the organization makes profits (Kravitz, 1999).
Generally, it can be concluded that there are major differences between balance sheet and income statement. The information in the two financial statements covers different time periods. The data in the two statements also communicate different information. The income statement shows how an organization has performed in a given year whereas the balance sheet shows the assets an organization has accumulated over time.
References.
Kravitz, W. W. (1999). Bookkeeping the easy way. Hauppauge, NY: Barron's Educational Series.
Warren, C. S., Reeve, J. M., Duchac, J. E., & Warren, C. S. (2012). Financial and managerial accounting. Mason, Ohio: South-Western Cengage Learning.
