Did you like how we did? Rate your experience!

4.5

satisfied

46 votes

Can you make profit and loss statement into balance sheet?

No of course not, the profit and loss account is just that, an account. However, you put the profit and loss account in a balance sheet. Let me explain. A balance sheet is a summary of the final values of all the firms accounts, so that Investors or auditors can check if anything fishy is going on. to prepare a balance sheet you simply take all the asset accounts and place it on the asset side, all the liabilities on the liabilities side (including capital) and voil: it balances (the sum of all asset values is equal to the sum of the liability and capital value, an essential feature in double entry book keeping. A profit and loss account is an account which shows us the incomes earned by the firm and the expenses incurred by the firm the balance between them being the firms profit or loss. This is nothing like a balance sheet which shows asset/liability values The surplus or deficit in an profit/loss account is transferred to the capital, as the owners of the firm claim the profits/ have to burden the loss. In companies the profit and loss section is put under Reserves and Surplus heading of the balance sheet in the liabilities side as the company is liable to pay the shareholders the profits. so the profit and loss account is shown in the balance sheet, sometimes hidden sometimes not, but it can never become a balance sheet. Hope this helps