Difference between Profit and Loss Account and Balance Sheet

Difference between Profit and Loss Account and Balance Sheet

Basis

Profit and Loss Account

Balance Sheet

1. Nature

It is an account.

It is a statement.

2. Period

It is prepared for an accounting period

It is prepared at the last day of the accounting period.

3. Recording

It records only income and expenses of the concern.

It records only assets and liabilities of the concern.

4. Profit/Financial Position

It shows performance of the business, i.e., profit earned or loss incurred by the business.

It shows the financial position of the business.

5. Accounts

Accounts that are transferred to the Profit and Loss Account are closed.

Accounts that are transferred to Balance

Sheets are not closed.

6. Balance

Balance of this account is transferred to the

Capital Account in the Balance Sheet.

Balance of this statement becomes the opening balances for the next period.

HLASS11-12th (COMMERCE).

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