Income Statement vs
Profit and Loss Account
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 is a T-account - a special kind of T-account with a special role. The gross profit is transferred into this account from another account called the trading account. All expenses are also transferred into this account.
The balance of the profit and loss account after transferring into it the gross profit an=d expenses represents the profit or loss for the year - the same figure we show as the profit or loss in the income statement. This balance is then transferred to the owners equity accounts, as profits (or losses) accrue to the owner.