What are the difference between Profit and loss account and Balance sheet?

The difference between Profit and loss account and Balance sheet are;

  • Balance sheet is a statement of assets and liabilities, whereas profit and loss is an account.
  • Balance sheet discloses the financial position of the business on a particular date, whereas, profit and loss account discloses profits earned or losses suffered during an accounting period.
  • Profit and loss account is prepared for the accounting period ending, whereas, Balance sheet is prepared as at the last day of accounting period.
  • Accounts which are transferred to Balance sheet do not lose their identity and become the opening balances for next period, whereas, those accounts which are transferred to the profit loss account are closed and cease to exist.