Solution 6.1

The Income statement is normally prepared for a period of time showing the summary revenues and expenses over a period of time e.g. a month, six months or a full year. The purpose of the profit and loss account is to show the net profit or loss that was incurred by business during a period of time detailing revenues and costs for the period.

The purpose of the statement of financial position is to show what the business owns (assets), and owes (liabilities and capital) at a point in time.