Difference between Balance Sheet and Profit & Loss Account

The accounting process ends with the preparation of the financial statement. The information about the financial position of any company is provided with the help of Financial Statements. Balance Sheet and Profit & Loss Account are two such statements that are prepared to understand the financial position of the company. Balance Sheet and Profit & Loss Account are actually prepared as an equivalent part of the company’s financial reporting process, which plays a significant role in helping shareholders like investors, creditors, and management to actually measure the company’s profitability and stability from various perspectives.

What is Balance Sheet?

A Balance Sheet is a statement that actually offers an overview of a company’s financial position at a particular point in time. A balance sheet can be defined as a financial statement that includes the assets, liabilities, and equity of the company. Balance Sheet is used as a metric that helps to evaluate the previous and present progress of the company. Mostly this balance sheet is prepared at the end of the accounting period which is 31st of March. It shows the financial position of the business in a systematic and standard form. Along with financial statements such as income statements, and statements of cash flow, the balance sheet is an important document to prepare. Balance Sheet helps to take rational decisions for the users of the statements.

What is Profit & Loss Account?

A Profit & Loss Account is the financial statement of an organisation that helps in determining the loss incurred or profit earned by the business during the financial or accounting year. In simple terms, a Profit and Loss Account is a summary of an organisation’s expenses and revenues and ultimately calculates the net figure of the business in terms of profit or loss. If the revenues of an organization are more than its expenses, it is known as Net Profit. However, if the revenues of an organization are less than its expenses, it is known as Net Loss. The Profit and Loss Account collects information from Trial Balance and other given transactions.

Difference between Balance Sheet and Profit & Loss Account

Basis	Balance Sheet	Profit & Loss Account
Meaning	Balance Sheet is prepared to provide the financial position of the company at a specific time span.	Profit & Loss Account means a concept that summarizes the revenues, expenses, gains, and losses of a company over a specific time period (year or quarter).
Components	Balance Sheet has the components like Assets, Liabilities, and Equity of Stakeholders.	Profit & Loss Account consists of the components like Revenues, Expenses, Gains, and Losses.
Motive	The motive of the Balance Sheet is to showcase the liquidity and stability of the company business.	The motive of the Profit & Loss Account is to evaluate the company’s profitability and the undergoing performance.
Equation	Assets = Liabilities + Shareholder’s Equity	Revenues – Expenses = Net Profit (or Net Loss)
Carryover of Balances	The ending balance of one time period becomes the opening balance for the upcoming period.	The net profit or the net loss is actually transferred to the Balance Sheet as the accumulated loss or retained earnings.
Valuation	Balance Sheet represents the boot value of Assets and Liabilities.	Profit & Loss Account report the actual value of Revenues and Expenses on entities.
Presence of Non-Monetary Items	Balance Sheet also consists of Non-Monetary items like accrued or advance income, etc.	Profit & Loss Account has only monetary items.