Difference Between Balance Sheet and Financial Statement

The main difference lies in their focus and scope. A balance sheet offers a snapshot of a company’s financial position at a specific moment, detailing assets, liabilities, and equity. On the other hand, financial statements comprise a broader set of reports. It includes the balance sheet, income statement, cash flow statement, and statement of changes in equity.  

A balance sheet is a financial statement that reports a company’s financial position at a specific time. In contrast, a financial statement is a broader term that encompasses several different types of financial reports that provide information about a company’s financial performance, position, and cash flow over some time. Together, these financial statements provide a comprehensive view of a company’s financial health and are an essential tool for investors, creditors, and other stakeholders. However, there are certain difference between Balance Sheet and Financial Statement. Let’s understand them.

Explore: What is Finance?

Table of Content

• Comparative Table: Between Balance Sheet and Financial Statement
• What is Balance Sheet?
• What is a Financial statement?
• Key Differences Between Balance Sheet and Financial Statement

Comparative Table: Between Balance Sheet and Financial Statement

What is Balance Sheet?

An organization’s balance sheet is a financial statement indicating its financial position at any given point in time. Another name for this is a statement of financial position.

The balance sheet reflects a company’s assets, liabilities, and equity information. A company owns or has control over assets such as cash, investments, inventory, property, and equipment. A company owes liabilities to others, such as loans, accounts payable, and taxes. Equity shows the residual interest in the company’s assets after deducting liabilities.

The balance sheet follows the accounting equation, which states that assets must always equal the sum of liabilities and equity. This equation must balance the balance sheet to be accurate, hence the name “balance sheet”.

What is a Financial statement?

A financial statement is a formal report that provides information about an organization’s financial performance, position, and cash flow. It is typically prepared by a company’s accounting department and is used to communicate financial information to stakeholders that are external to the company such as investors, creditors, and regulatory agencies. Financial statements typically include a balance sheet, income statement, and statement of cash flows and are an important tool for evaluating a company’s financial health. They provide valuable information about the company’s revenues, expenses, assets, liabilities, and equity, as well as other key financial metrics such as profitability, liquidity, and solvency.

Key Differences Between Balance Sheet and Financial Statement

• The balance sheet is a financial statement showing a company’s current financial position. It provides information on a company’s assets, liabilities, and equity. A company owns or controls assets such as cash, investments, inventory, property, and equipment. A company owes liabilities to others, such as loans, accounts payable, and taxes. Equity shows the residual interest in the company’s assets after deducting liabilities.
• On the other hand, financial statements summarize a company’s financial performance over time. They include income statements, cash flow statements, and balance sheets. Income statements show a company’s revenue and expenses and whether it made a profit or loss during the reporting period. Cash flow statements show the inflows and outflows of cash during the period.
• Balance sheets are usually prepared at the end of each accounting period, while financial statements are prepared quarterly or annually.
• Accounts prepare balance sheets are generally simpler than financial statements, as they only include three categories (assets, liabilities, and equity), while financial statements can be more complex.
• Balance sheets may be required by law or accounting standards, while financial statements are usually required by law.
• Overall, balance sheet reflects a company’s financial position at a point in time, while financial statements summarise a company’s financial performance over time.