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Essentials: P&L Statements vs Balance Sheets

Thursday, March 07, 2019

Essentials: P&L Statements vs Balance Sheets

What is a Balance Sheet?
A balance sheet represents the financial position of the company on a specific date.
It enables readers to understand the entity's financial stability, liquidity and solvency. The balance sheet is prepared on the basis of the balances transferred from the P&L account. 

 
What is a Profit & Loss Statement?
 
A profit & loss Statement represents profit earned or loss suffered by business for the accounting period.

The P&L Statement is a depiction of an entity’s revenue and expenses.
 
What's the difference?
 
P&L statements answer a very specific question, is the company profitable?
 
Balance sheet reveals what companies own and owe. 
 
 
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