The income statement is a financial accounting document that shows the company's expenses and revenue over a determined period. The income statement shows the cash flow of the organization concerning expenditures and income earned (Alamry & Mashkour, 2020). In contrast, a balance sheet is a financial statement that summarizes the liabilities, equity, and assets that an institution has.
The income statement and a balance sheet have unique elements. The primary aspects of an income statement include profit before taxes, net income, gross profit, and operating profits. In contrast, a balance sheet has current assets, current liabilities, long term assets, and long term liabilities.
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The income statement's profit before taxes of an organization is dated by computing the sales revenue sum less operating expenses and cost of goods sold over a set period. Additionally, a firm's gross profit is the remaining amount when the cost of products sold has been deducted from revenue during a particular time frame. The operating profits are determined by deducting gross profit, depreciation, operating expenses, and amortization over a timeline. In contrast, the current assets comprise short-term investments, cash, inventories, and account receivables in one year. Current liabilities include wages payable, accounts payables, interest payables, and accrued expenses payable annually, while long term liabilities are loans, pension obligations, and deferred taxes for longer than one year. The income statement is also known as the profit and loss statement, while the balance sheet is also identified as the annual report (Perkins, 2009). The income statement is dated in split time frames to indicate the document records earnings as received continuously. In contrast, the balance sheet is only computed once every year, which shows that assets and liabilities are essential, but not critical compared to income flow.
References
Alamry, S. C., & Mashkour, S. C. (2020). Analysis of Financial Statements (1st ed.). Al- Alalamia press Samawah. https://www.researchgate.net/publication/338385318_ANALYSIS_OF_FINANCIAL_STATEMENTS
Perkins, D. (2009). Financial Accounting for Performance Assessment and Strategic Decisions . Wiley Custom Learning Solutions.
