A summary is given below of the differences between the profit and loss account and balance sheets.
Difference Between Profit & Loss Account and Balance Sheet FAQs
A profit and loss account (P&L) reports the true financial position of the business, i.e. whether you are making a profit or loss over a period of time. A balance sheet reports your assets/liabilities at a point in time so will never show if you've made a profit or loss.
Balance sheet is prepared by putting all your assets on one side and all your liabilities and capital on the other side. Your equity is calculated as the difference between the two sides.
Liabilities are an obligation or debt that must be repaid by a certain date.
Accounts show our financial position by recording our assets, liabilities and equity.
The following are types of accounts: assets, liabilities, equity, revenue/income, expenses/loss, capital
True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.
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