What appears on a balance sheet

Differences and relationships between the balance sheet and the GUV

How much has my company made this year? Where does my capital come from and how did I invest it? Countless questions that arise every day in the professional life of a self-employed person and are of great importance for economic success. The answers can be found in the balance sheet or profit and loss account, also abbreviated to the income statement. But what is the difference?

Table of contents

  1. The daily duties of an entrepreneur
  2. Balance sheets: based on double entry bookkeeping
  3. P&L: Success of the company
  4. So what's the difference?

The daily duties of an entrepreneur

As nice as the freedoms of a self-employed person are: In contrast to employees, you have to take care of your accounting yourself, depending on the size and type of your company. Discharge of taxes, annual financial statements, accounting requirements - terms that are interrelated and regularly cause confusion.

Above all, the profit and loss account is always the focus. It is part of the balance sheet and reflects the success of your company; In certain aspects, however, there is also a difference between the two measured quantities. But first the basics.

 

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Balance sheets: based on double entry bookkeeping

On a certain date, entrepreneurs have to create an invoice in which their assets are shown on the assets side and their capital in the liabilities - which in turn can be divided into equity and debt.

This separation into two sides makes the origin and use of the assets clear, as inflows and outflows are precisely documented. The exact structure is set out in Section 266 of the German Commercial Code (HGB) and breaks down the individual accounts.

The balance sheet presents the current asset situation in detail and is used for information, documentation and profit determination.

Partnerships and corporations are obliged to report, as are sole traders with an annual turnover of over EUR 600,000 or a profit of over EUR 60,000. Sole traders whose sales are below this amount, as well as all freelancers, only have to create an income surplus calculation.

P&L: Success of the company

The income statement is part of the balance sheet and shows a comparison of income and expenses. If your company has more income than expenses, you've made a profit - otherwise it's a loss.

The P&L account can be found on the liabilities side of the balance sheet and is a sub-account of equity - thus an important component for corporate planning.

It is therefore often referred to as a collective or auxiliary account, since expenses and income are initially summarized there. They map the entire financial year, so that it is a period calculation. In contrast to the balance sheet, the income statement shows clearer statements about the activities in the company so that decisions for the future can be made more easily with their help.

So what's the difference?

At least once a year, companies are obliged to compare their income and expenses - be it the income statement for small companies or a comprehensive annual financial statement. It forms the end of the bookkeeping, with the balance sheet and income statement representing important main components. Both offer transparency about the financial situation, but there are also one or the other difference:

content

A balance sheet is divided into assets and capital and thus shows all of the company's stocks. In contrast, an income statement shows the success by comparing expenditure and income.

Statement / result

The balance sheet shows the financial security and stability of a company with the help of various key figures, such as the equity ratio. The income statement shows previous costs and sales, as well as profits earned.

perspective

As the term “balance sheet date” suggests, it is a snapshot of a single point in time in which all financial resources are shown. The difference here: in the P&L, the company is analyzed over a certain period of time, for example a year or quarter.

However, the annual surpluses must match in the income statement and in the balance sheet at the end. Both are important parameters in accounting - for you and your further planning, as well as for third parties involved. Despite a difference in the list, they both provide information about profitability and success and are therefore essential for proper bookkeeping.

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Hendrik is an expert in online marketing & SEO. Here he gives tips about finances, accounting and founding for the self-employed and all those who are still in the planning phase.