Balance Sheet gives the snapshot of the business’s financial position at a particular instance. It basically measures the wealth of a business firm at that instance. On a Balance sheet, the main accounting formula is Owner’s Equity = (Assets-Liabilities). The Income statement on the other hand is the summary of the revenue and the expenses for a specified time period. Income statement actually measures the change in wealth. The main accounting formula on an Income statement is Net Income = (sales revenue + other income) – (sales returns/allowances + cost of goods sold + total operating expenses + interest expense + income tax). Assets such as Property, Plant and Equipment are included in a balance sheet, but not on an Income statement. Income Tax paid is included in the Income Statement but not on a Balance sheet.
Article Copyright – Deepesh Joseph (2003-2020)
1. Williams C. (2007). Management (4th ed., ). Thomson South Western.