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Balance Sheet vs. Income Statement: What's the Difference?

Edited by Huma Saeed || By Sawaira Riaz || Published on November 12, 2023
Balance Sheet shows a company's assets, liabilities, and equity at a specific point in time, while an Income Statement displays revenues, expenses, and net income over a period of time.

Key Differences

The Balance Sheet provides a snapshot of what a company owns (assets) and owes (liabilities), along with its equity at a particular moment in time. This statement represents the financial position of a business on a specific date.
Sawaira Riaz
Nov 12, 2023
In contrast, an Income Statement, sometimes called a Profit and Loss statement, presents the financial performance of a company over a period, typically a month, quarter, or year. It details the revenues earned and the expenses incurred, resulting in either a profit or a loss. While the Balance Sheet is about the present moment, the Income Statement focuses on the financial activities that occurred during a particular period. A Balance Sheet is analogous to a photograph, capturing a single moment, whereas an Income Statement is more like a video, showing the flow of transactions over time.
Sawaira Riaz
Nov 12, 2023
Both the Balance Sheet and the Income Statement are crucial for stakeholders to gauge the financial health and performance of a business. They are interrelated; the results from the Income Statement can influence the figures on the Balance Sheet and vice versa.
Sawaira Riaz
Nov 12, 2023

Comparison Chart

Nature

Snapshot at a specific date.
Performance over a period of time.
Sawaira Riaz
Nov 12, 2023

Components

Assets, Liabilities, and Equity.
Revenues, Expenses, and Net Income.
Sawaira Riaz
Nov 12, 2023
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Purpose

Shows financial position.
Shows financial performance.
Sawaira Riaz
Nov 12, 2023

Time Frame

Single point in time.
Duration (e.g., month or year).
Sara Rehman
Nov 12, 2023

Outcome

Net worth or equity of the company.
Profit or loss for the period.
Aimie Carlson
Nov 12, 2023

Balance Sheet and Income Statement Definitions

Balance Sheet

Balance Sheet provides a snapshot of a firm's financial health on a particular date.
The Balance Sheet for December 31st demonstrated a rise in shareholder's equity.
Sawaira Riaz
Oct 21, 2023

Income Statement

Income Statement delineates the flow of funds into (revenues) and out (expenses) of a business, portraying its financial operations.
The Income Statement's details allowed the board to strategize better for the next fiscal year.
Harlon Moss
Oct 21, 2023
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Balance Sheet

Balance Sheet is the financial statement that equates a company's assets with its liabilities and equity.
The Balance Sheet helps stakeholders determine if the business has sufficient assets to cover its debts.
Sawaira Riaz
Oct 21, 2023

Income Statement

Income Statement showcases how much a business earned and spent, resulting in net income or a net loss.
The annual Income Statement displayed a net income, indicating a successful year for the company.
Sawaira Riaz
Oct 21, 2023

Balance Sheet

Balance Sheet is a financial statement showing a company's assets, liabilities, and equity at a specific point in time.
At the end of the year, the company's Balance Sheet revealed an increase in assets.
Sawaira Riaz
Oct 21, 2023

Income Statement

Income Statement is a financial report outlining a company's revenues, expenses, and profits or losses over a period.
The Income Statement for the last quarter revealed higher-than-expected profits.
Sawaira Riaz
Oct 21, 2023

Balance Sheet

Balance Sheet represents the resources a business owns and its financial obligations.
By examining the Balance Sheet, the investors could ascertain the company's debt load.
Sawaira Riaz
Oct 21, 2023
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Income Statement

Income Statement provides insight into a company's operational performance by detailing its earnings and expenditures.
Through the Income Statement, it was evident that sales increased while costs remained stable.
Sawaira Riaz
Oct 21, 2023

Balance Sheet

Balance Sheet is a tool that illustrates the distribution of a firm's resources and obligations.
The CFO presented the Balance Sheet to showcase the company's strong financial position.
Sawaira Riaz
Oct 21, 2023

Income Statement

Income Statement is the financial document highlighting a firm's profitability over a set duration.
Stakeholders reviewed the Income Statement to gauge the return on their investments.
Sawaira Riaz
Oct 21, 2023

FAQs

What is the main purpose of a Balance Sheet?

The Balance Sheet provides a snapshot of a company's assets, liabilities, and equity at a specific point in time.
Sawaira Riaz
Nov 12, 2023

Which statement shows a company's profitability?

The Income Statement shows a company's profitability, detailing revenues and expenses.
Harlon Moss
Nov 12, 2023

Can a Balance Sheet help in assessing a company's debt?

Yes, a Balance Sheet lists a company's liabilities, which includes its debts.
Sawaira Riaz
Nov 12, 2023

Why are both Balance Sheet and Income Statement essential for investors?

Both provide critical insights into a company's financial health, helping investors make informed decisions.
Aimie Carlson
Nov 12, 2023

If a company is profitable, will it always have a positive net worth on its Balance Sheet?

Not necessarily. Profitability (from the Income Statement) doesn't guarantee positive net worth, as a Balance Sheet also considers liabilities.
Aimie Carlson
Nov 12, 2023

What's the primary difference between a Balance Sheet and an Income Statement?

The Balance Sheet shows a company's financial position at a moment in time, while the Income Statement reflects its financial performance over a period.
Janet White
Nov 12, 2023

If a company buys machinery, where is this reflected?

It's reflected as an asset on the Balance Sheet.
Janet White
Nov 12, 2023

Can an Income Statement provide information about a company's debts?

No, debts are listed as liabilities on the Balance Sheet.
Aimie Carlson
Nov 12, 2023

How often is an Income Statement typically prepared?

An Income Statement is usually prepared monthly, quarterly, and annually.
Sawaira Riaz
Nov 12, 2023

Does the Balance Sheet show company revenue?

No, revenues are presented on the Income Statement. The Balance Sheet focuses on assets, liabilities, and equity.
Aimie Carlson
Nov 12, 2023

Do both Balance Sheet and Income Statement need to be audited?

Yes, in many jurisdictions, both statements are audited, especially for publicly traded companies.
Sara Rehman
Nov 12, 2023

How do dividends paid affect the Balance Sheet and Income Statement?

Dividends reduce retained earnings on the Balance Sheet and are also shown as an appropriation on the Income Statement.
Sara Rehman
Nov 12, 2023

Where can I find information about a company's sales on these statements?

Sales or revenue information is provided on the Income Statement.
Harlon Moss
Nov 12, 2023

Are depreciation expenses shown on the Balance Sheet?

No, depreciation expenses are on the Income Statement, but the accumulated depreciation affects asset values on the Balance Sheet.
Sawaira Riaz
Nov 12, 2023

What is the connection between the ending Balance Sheet of one year and the starting Balance Sheet of the next year?

The ending Balance Sheet of one year becomes the starting Balance Sheet for the next year.
Sara Rehman
Nov 12, 2023

Can the Income Statement show a profit even if the Balance Sheet reveals more liabilities than assets?

Yes, it's possible if the company had a profitable period but has accumulated more liabilities over its lifetime.
Janet White
Nov 12, 2023

How can a negative net income on the Income Statement affect the Balance Sheet?

A negative net income decreases retained earnings on the Balance Sheet.
Aimie Carlson
Nov 12, 2023

How are retained earnings on the Balance Sheet affected by the Income Statement?

Retained earnings on the Balance Sheet increase with net income and decrease with net loss from the Income Statement.
Aimie Carlson
Nov 12, 2023

Which statement would provide information about a company's operating expenses?

The Income Statement lists operating expenses.
Janet White
Nov 12, 2023

Do both the Balance Sheet and Income Statement follow the double-entry bookkeeping system?

Yes, both statements are based on the double-entry system, ensuring assets equal liabilities plus equity.
Harlon Moss
Nov 12, 2023
About Author
Written by
Sawaira Riaz
Sawaira is a dedicated content editor at difference.wiki, where she meticulously refines articles to ensure clarity and accuracy. With a keen eye for detail, she upholds the site's commitment to delivering insightful and precise content.
Edited by
Huma Saeed
Huma is a renowned researcher acclaimed for her innovative work in Difference Wiki. Her dedication has led to key breakthroughs, establishing her prominence in academia. Her contributions continually inspire and guide her field.

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