Question

Explain the following statements: although the balance sheet can be thought of as a snap shot of a firms financial position at a point in time, the income statement reports on operations over a period of time.

Answer 1

Income statement contains net profit or loss on operations of the firm for a given period, mostly on an annual basis. It consists of revenues and expenditure for various heads, interest paid and taxes given out. After payment of dividends any left amount goes over to the balance sheet.
Balance sheet on the other hand provides the value of asset, liabilities and equity of a firm as on the date of reporting which is mostly 31st december for US firms. The balance sheet shows each account balance at a particular time i.e. time as on reporting date.