Balance Sheet Vs Financial Statement

Companies in India produce three important financial statements that are being reflected in their business activities and in their profitability table. These financial statements are reflected in each accounting period. The most important financial statements are – the balance sheet, the income statement, and also the cash flow statement. So, we see the balance sheet comes under the financial statement. 

The difference does not end here, we will discuss what is a balance sheet and what the financial statement is in this content with a detailed comparison chart under the heading ‘Balance sheet Vs Financial Statement’ which will discuss the difference between balance sheet and statement of affairs.

What is a Balance Sheet?

A Balance sheet is a representation of the assets, liabilities, and equity contents of the entity. This statement is outlined by all the enterprises, the sole proprietorship firm or a partnership enterprise. The balance sheet also reveals the financial security of the enterprise.

There are two heads while preparing a Balance sheet, they are – assets, equity, and liabilities. Under the assets, all the current assets and all the non-current assets of the enterprise are recorded while the equity and the liabilities head will cover all the shareholder’s equity and all the current and non-current liabilities of the firm.

Formula Used for a Balance Sheet

The balance sheet uses the following accounting equation, where the assets on one side, and the other side it has liabilities in addition to the shareholders' equity, on the other hand, balance out:

Assets = Liabilities + Shareholder’s Equity

Contents of the Balance Sheet:

The business's balance sheet is been classified under one of these three categories:

Assets

Liabilities

Owner Equity. 

The balance sheets also include the addition of the "notes" section which holds relevant information that does not fit under any accounting categories.

What is a Financial Statement?

A statement that documents the economic pursuits of the enterprise which is in respect of the trading concern is known as the financial statement. Financial statements present a detailed view of the solvency and the data of the enterprise. A financial Statement is being publicly documented during the closure of the financial year; this will permit the stakeholders to be aware of what type of performance is shown by the enterprise. Financial statement guarantees the investors and creditors to comprehend and understand how exactly their capitals have been employed throughout the financial year.

Using The Financial Statement Information

Investors and financial analysts or even outsiders rely on the financial data to analyze and judge the performance of a company and thereby make their own predictions about the future direction or flow of the company's stock price. One of the most important resources of reliable and audited financial data is the annual report that contains the firm’s financial statements drafted in it.  

These financial statements are used by the investors, by market analysts, and also the creditors which help them to evaluate a company's financial health and their earnings potential. The three major types of financial statement reports are the balance sheet, income statement, and the statement of cash flows.

Financial statements include a balance sheet that reflects the financial standing which is recorded as per the date of the financial statements; the profit and loss statement that describes the formation of the operating result; a cash flow statement depicting the company or describing the acquisition and disposal of funds during the accounting period.

Difference Between Balance Sheet and Financial Statement

The accounting information is a report which is in the form of a financial statement. The financial statement is actually the final outcome of the accounting process which is prepared as per the basic accounting principles, by the concepts, and by its assumptions. A financial statement helps to draw financial conclusions on the company’s profitability status, efficiency, performance, and position. These statements are furnished in such a way that the users of the financial statement can understand them easily and thereby take decisions. This includes a profit & loss account, balance sheet, and also cash flow statement.

While, Balance Sheet, on the other hand, is a statement that sets out the ownership and the owning of the company, at a certain determined date. The balance sheet represents the assets, liabilities, and capital of the enterprise. Balance Sheets are prepared either in horizontal or in a vertical format. 

Here we present a different chart that will distinguish between the Balance Sheet and Financial Statement clearly.