Info 1: Difference of income statement and balance sheet
Info 2: Example for income vs balance sheet statement
Info 3: Income statement vs cash flow statement
Info 4: Rules for income and balance sheet
Quick pick
Income statement record the profits and loss of the business, balance sheet statement record the asset and liabilities of the business, each account the difference section activities of the business.
This article occupied the information about what if the difference of income and balance sheet statement, brief example for income and balance sheet, key distinction on income and cash flow report, finally rules of income and balance sheet.
Info 1: Difference of income statement and balance sheet
Income and balance sheet is the financial statements which is used with the purpose of recording the three things credit, debts, and balance. But the two statement of recording function are not that same.
For each kind of industry it had the product or service to offer to the people’s, were such institutions produce income and expenses on the production and sales of the specific business.
Using the activities that occur on the business term period of income and spending are recorded in the income statement, simply in other words called profits and loss statement.
Next the balance sheet record the activities that performed by businesses for asset, debts (liabilities) and equities that affect over time on each operation of the business terms quarterly and annually.
Therefore the fundamental activities of the income and balance sheet statement is credit and debts but the fundamental key difference of the income and balance sheet is income statement measure the profits and loss of the business and balance sheet record the balance between the asset, liabilities and equity of the business.
Without a income and balance sheet no investors would take rational decision to invest in any kind of public corporation plus Securities and exchange commission strictly required these two statement at basic for each corporation that issues shares to the public.
When the debts got paid, it’s only report in the balance sheet by showing the debts number decreased and when its had revenue through product income statement notify the number as business earnings.
For the reason, balance sheet not play a role in earnings of the industry, income statement major role would be demonstrating the final earnings that happen to the business after the all kind of spending such as cost of goods, marketing expenses, administration expenses, interest expenses extra…
To make more clear about this distinction income and balance sheet lets jump into one of the brief example below.
Info 2: Example for income vs balance sheet statement
OTTA is the textile industry which had been running for almost more than 13 years in the market, it last year revenue is 130 million dollars, then to produce such textile it cost about $45 million with other spending including of interest amount, administration cost and marketing.
However OTTA had the $250 million worth of inventory with properties. And 120 million dollars in liabilities of debts payment with finalize of 130 million dollars in the equities.
Here the inventory, property, then debts worth of 120 million and equity are noted in the accounted of balance sheet statement because they are not the earnings or loss of the OTTA company.
Then at the same time revenue, cost of goods, interest payment or income, administration management expenses, then marketing spending are noted in the income statement of OTTA company because they are not a asset and debts, it just activities of received and deduct amount in the operation of business.
But most of the people’s confuse the income statement and cash flow statement of the company, lets dive into know the key distinction about it.
Info 3: Income statement vs cash flow statement
Cash flow statement would be used to record the earnings of the business, then income statement also used to notify the earnings of the business, this might little confusing lets see deeply.
Cash flow and income statement illustrate the earnings but cash flow record the income that only received inside the business bank account not just a received record.
But the income statement record the income that received or non received inside the bank account, however it will receive it but just record it based on the measurements of sales and invoices. These all statement would had the rules to create and noted the accounting.
Info 4: Rules for income and balance sheet
Whenever any of the performance occur in the business, it must happen with rules and regulations of certain method, breaking the rules would leads to any kind issue for the organizations.
Like, income and balance sheet also constructed with rules called general accepted accounting principal (GAAP) or international Financial accounting standards (IFAS) with authorization of government accounting ruling department of each country.