Profit and Loss Account and Balance Sheet
The Relationship between Profit and Loss Account and Balance Sheet
Understand the correlation between profit and loss account and balance sheet. In financial planning, both become the essential factor. Here is some explanation that can help you to learn about it.
The balance sheet enables you to get a financial illustration in a given moment. It may not show the daily transaction or the business’s current profitability. However, most of the results are related to or even affected by the profit and loss transaction.
Meanwhile, the profit and loss account informs the summary of the trading transaction in a business. It summarizes the income, sales, expenditure that becomes the result in profit and loss in a specified period.
Profit and loss account and balance sheet provide you with the company financial report. Individuals can see any profit that is not paid as dividends. It presents on the balance sheet in the retained profit column.
The amount in the balance sheet is determined to be part of the income and expenses. It can be cash or at the bank as recorded in the profit and loss statement.
Sample of Profit and Loss Account and Balance Sheet :
The report is beneficial if the business has a plan with a loan in the short term. Individuals can see it under the current liabilities of the balance sheet. Yet, the loan does not appear in the profit and loss account.
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