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Distinguish the different between balance sheet vs financial statement

admin April 17, 2023

The balance sheet vs financial statement are closely related to each other, helping businesses to gain a comprehensive overview of their financial position.

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Important of balance sheet vs financial statement

The financial performance evaluation of a company relies on essential documents such as balance sheets and financial statements. 

However, there are significant distinctions between these two documents because they serve different purposes. Knowing the differences between financial statements and balance sheets can provide insights into how businesses structure and monitor their financial status. 

It is essential for finance professionals and other employees who analyze these documents to comprehend these differences by analyzing both of it, stakeholders can gain a more complete understanding of a company's financial health and make informed decisions regarding investments, lending, and other financial activities.

Distinguish between the balance sheet vs financial statements

Knowing clearly financial report is essential for finance professionals

What are financial statements?

financial statement is a record that summarizes a company's financial position, including its profits and expenses, usually period of time, or a quarter or a year. Regardless of its size or industry, every business creates and employs financial statements.

Various individuals use financial statements, including employees who analyze their company's profitability and efficiency. These statements help them to compare their performance with that of other firms in the same industry. 

Investors also utilize financial statements to assess how well a company is managing its financial contributions, while creditors rely on them when businesses apply for loans to determine if the business can make the required repayments.

People often use the term "financial statement" for each individual part of it. However, that's not the case. Each section of a financial statement has its own name, and this helps accountants avoid confusion between different types of financial statements. It is important to recognize this common mistake and verify whether the person is referring to the complete financial statement or only a specific section of the document.

Distinguish between the balance sheet vs financial statements

A financial statement is a record that summarizes a company's financial position

What are balance sheet

The balance sheet is an important component of the annual financial statement. It provides a detailed account of what a company owes and what it owns. The balance sheet is closely related to the annual financial statement, as it reflects all of the company's activities during the past fiscal period

Companies utilize balance sheets to evaluate their spending, resources and liabilities. As part of their evaluation of a company's financial statements, investors and creditors also analyze company financial statements.

Distinguish between the balance sheet vs financial statements

The balance sheet is an important component of the annual financial statement

Differences between balance s​heet vs financial statement

Criteria Financial statement Balance sheet
Objective Disclosing the overall financial condition of the company. Present a summary of a company's assets and liabilities
Content Balance sheet, Income statement,  Assets, Liabilities, Shareholder equity
Length
 
Containing balance sheet and more reports so it will take longer to prepare Since a balance sheet is only a component of a financial statement, it is a relatively brief document. It contains fewer data and therefore requires less time to create and review.
Stage of creation Final stage Anytime but must be done before creating the financial statement
Understanding Referring to either an entire financial report or any of its individual sections Specific and easily understood because of its same components and objectives.

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