The balance sheet and income statements are used in financial accounting because they are regarded as the most important financial statements. The Balance sheet lists assets and liabilities of the organization in a given financial period or fiscal year. An income statement was also known as Profit and loss statement and it’s a report for income and expenses over a specific period of time maybe quartile year.
In regard to performance an income statement shows how a company has performed by listing sales and expenses and the resulting profit or loss. A balance sheet summarizes the company’s assets liabilities and shareholders’ equity at a specific point in time to analyze how a company pays for things (Weygandt, Kieso, 2008). Income statements report operating results such as, sales and expenses. This allows investors to evaluate company’s performance and gives a prospect on the way forward. The balance sheet on the other hand presents the strengths of a company which enables investors to factually calculate days of working capital. Balance sheets can also identify trends of how net profit is used, receivables and the payables.
A marketing manager should incorporate both the income statement and the balance sheet as they correlate. An income statement can be used for a specific time period to account for the debit and credit between balance sheet at the beginning and end of period as accounting is a double entry system. Although it would be better to use a balance sheet as an income report may be subject to biasness as per the income received .The balance sheet is efficient because it accounts for cash inventory and property on the asset side while accounts payable or long-term debt is accounted on the liability side. (Eisen, 2007).The main difference is that income statements describe the current year’s performance while balance sheet describes the overall position of the company right from the starting year of business to current year and provides information about all assets and liabilities applied in the business.
Eisen, P. J. (2007). Accounting barron’s accounting barron’s business review series business
Review books. (5 ed., pp. 177-200). New York: Barron’s Educational Series
Weygandt, Kieso, P. D. K. A. L. D. (2008). Hospitality financial accounting (2 ed., pp. 110-145).New Jersey: John Wiley and Sons.