Income Statement vs Balance Sheet
Revenue, expenses, and profit over a period of time. Assets, liabilities, and equity at a single point in time.
What is the difference between Income Statement and Balance Sheet?
Income statement = performance over a period (a movie). Balance sheet = position at a moment (a photograph).
| Income Statement | Balance Sheet | |
|---|---|---|
| In one line | Revenue, expenses, and profit over a period of time. | Assets, liabilities, and equity at a single point in time. |
| Example | $10M revenue, $6M cost of goods sold, $2M operating expenses: $2M operating income before interest and taxes. | $4M current assets and $2.5M current liabilities gives $1.5M of working capital. |
| Unit | Economics & Financial Reporting | Economics & Financial Reporting |
| Series 65 | Section 1: Economics & Business | Section 1: Economics & Business |
What is Income Statement?
Also called the profit and loss statement. It flows from revenue, minus cost of goods sold (gross profit), minus operating expenses (operating income, or EBIT), minus interest and taxes, to net income. Covers a period - a quarter or a year - unlike the balance sheet, which is a snapshot.
What is Balance Sheet?
Assets = Liabilities + Shareholders' Equity, always. Items are split into current (converting to cash or due within a year) and long-term. Working capital - current assets minus current liabilities - is the quick read on short-term health.