From the course: Accounting Foundations

Differences between the balance sheet and the income statement

From the course: Accounting Foundations

Start my 1-month free trial

Differences between the balance sheet and the income statement

“

- As we know, there are three primary financial statements, the balance sheet, the income statement, and the statement of cash flows. - The balance sheet and the income statement have been around for what, 500? Over 500 years. - The statement of cash flows has only been around for 35 years, so we'll leave that to one side for now. - Let's just talk about a comparison between the balance sheet and the income statement. Those stately old financial statements that have been our friends for over 500 years. - [Instructor 1] The balance sheet is a listing of assets and liabilities. The balance sheet answers the question, what do you have and what do you owe as of today? - [Instructor 2] So you could theoretically do a balance sheet any old day, today, tomorrow, the end of the year. The balance sheet is a report as of a point in time. It's often spoken of as being a snapshot. Balance sheet is a snapshot as of right now what do you have and what do you owe. - [Instructor 1] The income statement, on the other hand, tells you how much you made, and if you think about that for a second, you realize, "Okay, how much I made over what period of time? This week, this month, this year?" - For the income statement, you have to define a period of time. So the balance sheet is as of a point in time, and the income statement is for a period of time. - For large companies in the United States, they're required to report an income statement every three months every quarter. - In addition, at the end of every year, large US companies are required to report an income statement for the entire year. So large US companies are required to report income for each three-month period and for each year. - [Instructor 1] So let's see if we've got this. Let's review. Close your eyes. I don't want you to look at anything. Just close your eyes. Which one of these two, a balance sheet or an income statement, is for a period of time? - Yeah, you've got it. The income statement is for a period of time. - [Instructor 1] So which one is for a certain point in time? - [Instructor 2] Yep, that's the balance sheet. - [Instructor 1] The balance sheet is a report as of a certain day of what do I have and what do I owe. - In contrast, the income statement is a report of how much profit I made for some period, a month or a quarter or a year. - That's the difference between a balance sheet and an income statement.

Contents