Balance sheet vs profit and loss
A balance sheet is a snapshot of what a company owns and owes on one specific date. A profit and loss statement, the P&L, covers a stated period and shows what the company earned, spent and kept. One is a photograph and the other is a story over time.
Balance sheet and Profit and loss statement side by side
| Balance sheet | Profit and loss statement | |
|---|---|---|
| What it shows | What the company owns and owes | What it earned, spent and kept |
| Time | One specific date, such as 31 March | A stated period, such as a quarter or a year |
| Main parts | Assets, liabilities and equity | Revenue, expenses and net profit |
| The arithmetic | Assets minus liabilities equals equity | Revenue minus expenses equals net profit |
| Photograph or video | A photograph: it can be out of date the next morning | A story: it needs its period to mean anything |
| Question it answers | What does the company own and owe, right now? | How did the company perform over the period? |
The balance sheet
The things a company owns are assets: cash in the bank, stock waiting to be sold, machines, buildings. The things it owes are liabilities: bank loans, unpaid bills. Subtract liabilities from assets and what remains is equity, what genuinely belongs to the owners. A balance sheet is dated: it says as of 31 March, not always.
The profit and loss statement
The P&L always covers a stated period. Within it, revenue is the money earned from the main business, expenses are what was spent to earn it, and net profit is what remains. That is the whole arc: earned, spent, kept. A profit figure without its period tells you little.
How they fit together
A company is one continuous story with several reports, and each answers a different question. A mismatch between statements is not proof of an error. It is a prompt to look closer, and the cash flow statement adds a third view of the same events.
Reading them together
A pile of assets on its own means nothing without what is owed against it, and one profit number means little without its period. Place the statements side by side before you trust either. Maetis does not give investment advice.
A snapshot and a year (hypothetical numbers)
An imaginary company, Sundar Textiles, owns ₹1 crore in cash, inventory and machinery on 31 March and owes ₹50 lakh in loans and dues. Its balance sheet shows ₹50 lakh of equity.
A listed maker of packaged food earns ₹500 crore and spends ₹420 crore in a year, so its P&L shows ₹80 crore kept as net profit. The first answers what is there on a date. The second answers what happened over a year.
Common questions
- What is the difference between a balance sheet and a profit and loss statement?
- A balance sheet shows what a company owns and owes on one date. A profit and loss statement shows what it earned, spent and kept over a period.
- What is equity?
- What genuinely belongs to the owners: assets minus liabilities.
- Which should I read first?
- Neither alone is enough. Read them side by side, with the cash flow statement, to see the whole story.
- Why does the balance sheet have a date?
- Because it is a photograph of one moment. The company could borrow heavily the next morning and the picture would already be old.
Related terms
This page compares ideas and does not recommend either one. Maetis does not give investment, tax or legal advice.