From the course: Accounting Foundations

The balance sheet and the income statement

From the course: Accounting Foundations

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The balance sheet and the income statement

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- As we know, there are three primary financial statements, the balance sheet, the income statement, and the statement of cash flows. - Now, the balance sheet and the income statement have been around for over 500 years. - The statement of cash flows has only been around for 25 years, so we'll set that to the side for now. - Let's just talk about a comparison between the balance sheet and the income statement. Those stately old financial statements that have been around and been our friends for over 500 years. - The balance sheet is a listing of assets and liabilities. The balance sheet answers the question, what do you have and what do you owe as of today? - [Host] So, you could theoretically do a balance sheet any old day. Today, tomorrow, the end of the year, the balance sheet is a report as of a point in time. It's often spoken of as being a snapshot. The balance sheet is a snapshot as of right now. What do you have, and what do you owe? - [Host] The income statement, on the other hand, tells you how much you've made. And if you think about that for a second, you realize, okay, how much have I made over what time period this week, this month, this year? - [Host] For the income statement, you have to define a period of time. So, the balance sheet is as of a point in time, the income statement is for a period of time. - For large companies in the United States, they are required to report an income statement every three months, every quarter. - In addition, at the end of every year, large US companies are required to report an income statement for the entire year. So, large US companies are required to report income for each three month period and for each year. So, let's see if we've got this, let's review. Close your eyes. - [Host] Close them. - [Host] I don't want you to look at anything, just close your eyes. Which one of these two, a balance sheet or an income statement is for a period of time? I think they got it, yeah! The income statement is for a period of time! - [Host] And which one is for a certain point in time? Yeah, it's the balance sheet! The balance sheet is a report as of a certain date of what I have and what I owe. - In contrast, the income statement is a report of how much profit I made for some period, a month or a quarter, or a year. - And that's one of the big differences between a balance sheet and an income statement.

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