Question

Clarify the difference between income statement and balance sheet?

Answer 1

Difference between income statement and balance sheet are as follows-

A. income statement is majorly focused at reflection of the net profit and income and cost of the company whereas balance shert is a reflection of the Assets and liabilities associated with the company.

B.analysis of income statement can be done through gross margin, net margin, operating margin whereas analysis of balance sheet can be done through current ratios, quick ratio, solvency ratios.

C.income statement is a reflection of how the business have performed in the current year and how much it has made profits where as balance sheet is a reflection of the overall financial position of the company and a projection about the long run.

D.balance sheet is used by many analyst in deriving out the intrinsic value of the shares where as income statement is used to look at the profit making position of the company.

E. profits which are made by any business is reflected in the balance sheet where the balance sheet items are not reflected in the income statement.