The Difference Between Profit & Loss Account and Balance Sheet

One of the three financial statements that companies provide on a regular basis is a balance sheet. Another is a profit and loss (P&L) statement. These statements give creditors, market analysts, and investors the means of evaluating the financial strength and growth potential of a company. The third financial statement is called the cash-flow statement.

In spite of the fact that the balance sheet and the P&L statement contain some similar financial information-such as revenues, expenses, and profits-there are some substantial differences.

Here is a comparison of key differences between the balance sheet and P&L in a visual way.

Read more: Top 5 Common Construction Accounting Problems

It is important to know the importance of the Balance Sheet and Profit & Loss Account in construction accounting. Using a Balance Sheet, the contractors of the financial statement can gain a clear understanding of the stability, liquidity, and solvency of the entity. The Profit and Loss Account helps to evaluate the performance of the construction company. It is unlikely that the terms will be confused since they are composed of items of different types.

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