profit & loss, balanced sheet

Profit and loss

Is about revenue and expense. E.g. sales, license fees, bills, etc.

 Balanced sheet

 is about asset and liability

E.g.  Assets can cash, house, equipments, etc.

     liability can a loan

The difference between asset and liability is the equity, i.e. how much the company worth at some point in time

As a company buying equipment, selling products, paying bills, etc. the profit and loss accumulated for a period of time, e.g. a month, should match the balanced sheet change for that month.

Profit and loss indicates how well the company is running for a period of time.

Balanced sheet indicates the financial position at a point in time.

Some accounting practices.

Accrue an expense (monthly estimated bill) and reverse it later when the actual expense bill is there

Prepayment for e.g. software license, to smooth the expense over time

Purchase order, without the GL account, because don't know the supplier yet.