Income Statement vs
Profit and Loss Account

by Shai
(India)


Q: What is the difference between the income statement and the profit and loss account?

A:
The income statement is a statement (a report) and forms part of the financial statements.

The profit and loss account ("account" not "statement") is a T-account - a special kind of T-account with a special role. The balance of the profit and loss account represents the net profit or loss for the year - the same figure we show as the net profit or loss in the income statement. This balance is then transferred to the owners equity accounts, as profits (or losses) belong to the owner.

For a business that sells products, the net profit or loss in the profit and loss T-account (the balance of the account) is calculated by transferring the gross profit from another account called the trading account and then transferring all other business expenses into this profit or loss account too. This then gives a balance which is the net profit or loss for the year. See the lessons on inventory on accounting for businesses that sell products (inventory).

The profit and loss statement ("statement" not "account") is the same as the income statement - it's another term for the same report (click the link here for an example of the income statement / profit and loss statement).

Comments for Income Statement vs
Profit and Loss Account

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woww1
by: mortins

Well if you ask me a lot of people did have a lot of confusion regarding both these and I am sure from what I have read from here most people who have understood the difference by now like me too.

No
by: Anushan

Income Statement is prepared for a business and an Income and Expenditure account is prepared for a not-for-profit making organisations ;-)

пиздец
by: Anonymous

хуйня все ребятки

Difference between income/expenditure and trading profit/loss account
by: Anonymous

Income come from members of the association while income come from the profit generated in trading account

income and profit and losss account
by: Anonymous

they both are same

P & L Vs Income statement
by: Anonymous

I think income statement is the form that is used for non profitable organizations like charities and organizations where the income is not coming from sales or revenue or any commercial or trading activity.

While profit and loss is used for trading economical organizations where profit is the target.

good but improve
by: bilal hasnain

very good definitaion but must include the picture of both accounts, if picture cant shown in this site then minimum heads of accounts should entered.

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