Explain the following statement: While the balance sheet can be thought of as a snapshot of the

QUESTION

Explain the following statement: While the balance sheet can be thought of as a snapshot of the firm”s financial position at a point in time, the income statement reports on operations over a period of time.
Balance Sheet or Statement of financial position reflects
the financial position of the organization at a particular date. It records all
the assets, liabilities and equity of the organization as on a particular date.
The balance sheet provides important information about the assets and
liabilities of the business to the stakeholders. Therefore the balance sheet can be thought of as a snapshot of the firm”s financial position at a point in time. On the other hand the income statement reports the financial performance of
the company in terms of net profit or loss over a specified period of time. It
records all the incomes

that that business has earned during a specified period
of time and records all the expenses that have been incurred during that period
to earn the income. The net income is calculated as the excess of income over
expense. The income statement provides useful information about the income and
expenses of the organization over a period of time. Therefore the income statement reports on operations over a period of time.

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