Income Statement vs
Profit and Loss Account

by Shai

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

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

Click here to add your own comments

The basic difference between Profit & Loss Account and Income Statement
by: mahbub mmhem

The Income Statement shows the profit/loss for any date/day of the year while a Profit & Loss Statement reports profit/loss for the whole accounting period.

Profit and Loss
by: Strategic Management

This is a very informative article. Properly analyzing your profit and loss statement is vital to business growth.

by: L.VENU

Profit and loss a/c is an account which have debit and credits but income statement is a statement which does not have any debit and credits.

by: scsc


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.

by: Anushan

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

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.

Click here to add your own comments

Return to Ask a Question About This Lesson!.

Enjoying this Website?
Help Support it with a Donation


Advertise on

Related pages

when using a perpetual inventory systeman example of an investing activity istrade and other receivables examplesretained earning debit or creditaccrued expense entryaccounts for synonyma trial balance lists accounts in which order4 fundamental accounting conceptstrial balance sheet accounts receivabledefine shareholder equityaccounting concepts are known asundistributed profitwhich inventory valuation method is most popular and whyowner equity formulaincome statement single step formatcreditors reconciliation statementwhat is the meaning of accountancyposting journal entries to t accountsaccounting cycle example problemsabbreviation for accountantaccounting journal entries templatehow to work out vat on excelprime cost formuladirect material cost formulawhat is the abbreviation for accountingdifference between bills receivable and accounts receivablewhy is the accounting equation importantbills payable and bills receivable meaningis merchandise inventory a current assetdefiner meaningifrs bad debt provisionlifo vs fifo inventoryaccrual journalprepaid rent debit or creditconstruction cash flow templatebad debts and provision for doubtful debtsjournal entries for periodic inventory systembookkeeping basics pdfmarkup and margin in accountingdebit credit meaning accountingcarriage and freightfifo cost formulahow to calculate cash inflowwho is sundry debtorsperiodic and perpetual inventory systemprofit and loss statements templatewhat does sundry expenses meancost of goods sold equalsaccrued payable journal entrymeaning of accrued revenuecash flow statement indirect method questions and answersvat exclusive formulasimply accounting chequesbasic gujarati wordsgeneral journal transactions exampleaccounting prime costcalculating gross profit ratehow to figure out ending inventoryaccounting trial balance worksheetmerchandise inventory current assetaccounts payable accrualswork out gross profit marginbookkeeping test questions and answersaccounting for beginners coursewhat are the steps in completing the accounting cyclemeaning of debit in accounting termsfinancial accounting tutorials pdffour inventory costing methodswages accrued journal entryclassified balance sheet formatwhat is accumulated depreciation classified ascash disbursement formatlifo method example pdf