When it comes to your balance sheet vs income statement, they are not the same. There is a difference. While both will give you some insight into your business's finances, each one has different variables. And a smart financial manager will take a look at both of them.
An income statement outlines the income and expenses for a specific period, such as a year, a quarter, or a month. On the flip side, a balance sheet outlines the business's assets and liabilities at a determined date. There are different time parameters for an income statement and a balance sheet.
Balance Sheet vs Income Statement
The balance sheet gives you a snapshot of your finances at one point in time. An income statement is akin to a video. It gives you an overall view of income over a time period.
An income statement is also known as a profit and loss statement. It includes expenditures, such as marketing, sold goods, administrative expenses, taxes, and operating expenses. All of these factors are taken into account in order to determine how much a business has earned during a specific time period. It shows the bottom line. It lets you know what you have and what you don't have. This way you have a better grasp on the financial health of your company. An income statement measures whether or not a business has made a profit. The income statement takes into account all of the expenses it takes to operate a business. It gives you a real picture of how much money your company is making and reveals trends. Knowing the trends allows you to take advantage of financial opportunities.
A balance sheet includes equities, liabilities, and a company's assets. These items are different from looking at the variables in an income statement. Assets are considered what the business owns. This includes things like machinery, trucks, cash, and inventory. Typically, inventory can quickly be turned into cash. Things like electronic equipment and office furniture are not generally able to be converted quickly into cash.
Liabilities are the amount of money a business owes to other parties. This includes things such as taxes, suppliers, and loans. They are factored into future money. Something like rent is considered both an expense on an income statement and a liability. When looking at a balance sheet, it is important to keep a lookout for things that just don't look right or balance. If it doesn't look right, you need to take a closer look.
Both the income statement and balance sheet are critical to a business operation. Both the income statement and balance sheet need to be accurate. If you are uncertain about handling your income statement and balance, it may be time to call in a team of experts. Financial experts will help you organize your financial data and report the right numbers. This is something that you might want to consider. Financial experts go way beyond basic bookkeeping. The end result of hiring a financial expert to do your income statement and balance sheet will improve cash flow and more profits for your company
Not sure about your company's balance sheet or income statement? Reach out to us today to see if we can help!