Financial Analysis – Profit and Loss Statements and Balance Sheets

Financial Analysis – Profit and Loss Statements and Balance Sheets

Items for Creating a 12-Month Income (Profit & Loss) Statement

An income statement outlines a business’s expenses and income over a specific period. One of the key components of the income statement is revenue. According to Hussey & Ong (2017), revenue includes all income items. Therefore, the accountant will need sales receipts, fees related to running the business, gross receipts, and operating revenue. The second key component is the cost of goods sold. The accountant will need information about the cost incurred to create and implement the diversity and training program. The third key component is expenses. According to Macy (2010), expenses are any expenditures made to run a business. They include vendor payment, advertising costs, professional fees, and salaries. The accountant will need information about the business’ daily monthly expenses, such as salaries and advertising costs. The accountant will also need information about the business’ tax expenditure, net profit, and gross profit. Hire our assignment writing services in case your assignment is devastating you. Our team of experts is ready to help.

Primary Distinctions between Profit and Loss Statements and Balance Sheets

According to Chibili (2019), a profit and loss statement shows a business’s ability to generate profit. Consequently, a balance sheet shows a business’s debts and assets based on income and loss. Another distinction is that a profit and loss statement always changes after every accounting period, whereas a balance sheet remains the same. Another difference is that a balance sheet discloses shareholder capital, business liabilities, and assets. In contrast, a profit and loss statement discloses indirect expenses and incomes in a business during a specific accounting period (Collings, 2013). The third difference is that a balance sheet is prepared at the end of the financial year, whereas a profit and loss statement is prepared after a specific time. A balance sheet is also viewed as a package, whereas a profit and loss statement is an account.

References

Chibili, M. N. (2019). The profit and loss account statement. Basic Management Accounting for the Hospitality Industry, 57-70. https://doi.org/10.4324/9781003022305-3

Collings, S. (2013). Financial accounting for dummies. For Dummies.

Hussey, R., & Ong, A. (2017). Statement of profit or loss – Revenue. Corporate Financial Reporting, 112-131. https://doi.org/10.1057/978-1-137-52766-0_7

Macy, A. (2010). The profit and loss statement. Record Label Marketing, 105-123. https://doi.org/10.1016/b978-0-240-81238-0.00006-x

Thacker, R. (2015). A study of income statement concepts. https://doi.org/10.31390/gradschool_disstheses.682