What is the difference between income statement (GuV) and balance sheet in the annual financial statements?
February 6, 2022 | 40,00 EUR | answered by Alice Heck
Dear tax advisor,
I am Günther Schaaf and I run a medium-sized company. In recent years, I have always had difficulties understanding the difference between the profit and loss statement (P&L) and the balance sheet in the annual financial statements. I have tried to educate myself and exchange ideas with other entrepreneurs, but I am still unsure about how these two documents differ from each other and what they each represent.
In the P&L, the revenues and expenses of a fiscal year are compared to determine the profit or loss, right? And in the balance sheet, the assets, liabilities, and equity positions are presented as of a specific date to show the financial situation of the company, or did I misunderstand that?
I am concerned that I may not be interpreting important key figures and information about my company correctly if I do not understand the difference between the P&L and the balance sheet. Can you explain to me how these two documents differ from each other and why they are both important for the annual financial statements? Are there specific conclusions that I can draw from the P&L and others that I must draw from the balance sheet? I am very grateful for your help and look forward to your explanations.
Thank you in advance.
Sincerely,
Günther Schaaf
Dear Mr. Schaaf,
Thank you for your question regarding the differences between the income statement (GuV) and the balance sheet in the annual financial statements. It is important to understand the significance of both documents in order to get a comprehensive picture of your company's financial position.
You are absolutely right in saying that the GuV compares the revenues and expenses of a fiscal year to determine the profit or loss. Therefore, the GuV provides information on whether your company was profitable or incurred losses during a specific period. The income side of the GuV lists all the revenues your company has generated, while the expenses side includes all costs and expenditures. By comparing these two sides, you can determine the net profit or loss for the fiscal year.
On the other hand, the balance sheet shows the financial position of your company at a specific date. It presents all assets (such as cash, receivables, investments) as well as the liabilities and equity of the company. Thus, the balance sheet gives an overview of the financial position of your company at a specific point in time and shows how the company's assets are financed through equity and debt.
The main difference between the GuV and the balance sheet is that the GuV reflects the financial performance of the company over a specific period, while the balance sheet provides a snapshot of the company's financial position. Both documents are crucial, however, in obtaining a comprehensive view of your company's financial health.
From the GuV, you can derive important indicators such as revenue, costs, profit margin, and operating income, while the balance sheet provides information on the liquidity, debt, and equity structure of your company. Therefore, it is important to analyze both the GuV and the balance sheet in order to make informed business decisions and keep track of your company's financial development.
I hope this explanation has helped you better understand the difference between the GuV and the balance sheet. If you have any further questions or need assistance in interpreting the two documents, I am more than happy to help.
Best regards,
Alice Heck
