Balance Sheet vs Profit & Loss Account

Updated: Feb 25, 2021

The two important parts of the financial statement are the Balance Sheet and the Profit & Loss
account. Without the preparation of these two entities the financial statement cannot be reported,
even the readers of the statement are not able to clearly understand the company’s position.
Hence, due regard is to be given by every company in the preparation of the two. However, people
don’t understand them very clearly and have problems distinguishing the two terms.

Balance Sheet

Meaning: A statement that shows the company's assets, liabilities, and equity at a specific date

Time frame: Financial condition on a certain date

Type: Statement

Information disclosed: Assets, liabilities, and capital of shareholders

The sequence of preparation: It is prepared after the preparation of the Profit & Loss Account

Profit & Loss Account

Meaning: Account that shows the company's revenue and expenses over a period of time

Time frame: Financial changes during the period

Type: Account

Information disclosed: Income, expenses, gains, and losses

The sequence of preparation: It is prepared before the preparation of the Balance Sheet

Key Differences between Balance Sheet and Profit & Loss Account
The Balance Sheet is prepared at a particular date, usually the end of the financial year while the
Profit and Loss account is prepared for a particular period.

The Balance Sheet reveals the entity’s financial position, whereas the Profit and Loss account
discloses the entity’s financial performance.

A Balance Sheet gives an overview of the assets, equity, and liabilities of the company, but the
Profit and Loss Account is a depiction of the entity’s revenue and expenses.

The significant difference between the two entities are is that the Balance Sheet is a statement
while the Profit and Loss account is an account.

The Balance sheet is prepared on the basis of the balances transferred from the Profit and Loss
account.

Conclusion

The Balance Sheet and Profit & Loss Account have their significance. A Balance Sheet enables the
reader of the financial statement to clearly understand the entity’s financial stability, liquidity,
and solvency. The Profit and Loss Account is helpful in comparison to the performance of the
company. The two terms consist of items of different nature, and that is why the chances of getting
confused between them are very less.

What is Nato?
The term NATO is also known as the North Atlantic entanglement. The full name of NATO is
North Atlantic Treaty Organization. The main purpose of this term is to guarantee the safety and
freedom of its members by political and military means. The headquarters of NATO is located in
Brussels, Belgium. It was established in 1949 in Washington. Regarding any joint action, NATO
says that it ‘committed to the peaceful resolution of disputes.

If seen, its main objective politically is to build trust and solve the problems of all the members. If
due to any reason the diplomatic efforts fail, then in that situation he has the military power to
undertake crisis management operations. It uses a collective eye system by which all independent
member states can agree with you against an attack by any outside party. Also, all the members
can cooperate with outside forces only.
Nato Countries List 2022
Before knowing the list of countries of NATO, you should know that according to the calculations
so far, there is a total of 30 countries in NATO. There are a total of 27 countries in Europe, one
country in Eurasia, and only 2 in North America. In our list, you will be told which countries are
included in this. Read the table given below carefully, which are as follows-

Canada (1949)
Croatia (2009)
France (1949)
Germany (1955)
Greece (1952)
Hungary (1999)
Czech Republic (1999)
Denmark (1949)
Estonia (2004)
Albania (2009)
Belgium (1949)
Bulgaria (2004)
Iceland (1949)
Luxembourg (1949)
Montenegro (2017)
Netherlands (1949)
Italy (1949)
Latvia (2004)
Lithuania (2004)
North Macedonia (2020)
Norway (1949)
Poland (1999)
Slovakia (2004)
United Kingdom (1949)
Portugal (1949)
Romania (2004)
United States (1949)
Slovenia (2004)
Spain (1982)
Turkey (1952)
How Powerful is Nato?
NATO is considered the most powerful alliance in the whole world. But an alliance is based on its
30 allied and their partner nations to support missions and operations. Through this alliance, all the
employees work in a group to fulfill any purpose. But NATO does not have its own armed forces.
But it has a permanent unified military command structure. by which civilians and the military of
all member states work together.

There can be no army through NATO. But there are many benefits available because it includes
the military capability of each member country of the coalition. Because all countries include
some of the other armies. Such as tanks, fighter jets, submarines, etc. By which the cause of the
Alliance helps a lot.

NATO has been bound by its military power since 1949, due to which today it has about 3.5
million soldiers, personnel and civilians, etc. Because of the alliance, all the members definitely
contribute one way or the other. All NATO missions are handled by the ACO under the leadership
of SACEUR. The Supreme Allied Commander Europe [SACEUR] coordinates all forces. After
the completion of any mission or operation, all the forces return to their respective countries.

First World War and the Democratic Control of Foreign Policy

Abstract
As the world went to war in 1914, a group of politicians, scholars and activists developed a
radically new concept of foreign policy. It rested on the assumption that the war was the result of a
flawed diplomatic system and that democratic institutions would make international relations
more peaceful. Specifically, they proposed a set of reforms to improve parliamentary oversight, to
prohibit secret treaties and to make foreign affairs more accessible to the general public. Most
historians have written them off as pacifist propagandists or isolated national splinter groups.
However, as this article shows, the advocates of democratic control built a transnational campaign
across more than two dozen countries and drew up an elaborate agenda which anticipated long-
lasting debates about foreign policy governance. The leaders of the campaign — including
American educationalist Fannie Fern Andrews, German social democrat Eduard Bernstein and
British politician Arthur Ponsonby — began by protesting decision-making in July 1914, but
gradually worked out a more rigorous foreign policy critique. They hosted conferences, circulated
academic-style publications and lobbied governments. Although their programme resonated with
Wilsonian and socialist visions for a democratic peace, it failed to materialize in 1919. Ultimately,
it remained an exercise in democratic governance.

World War II, also called Second World War, conflict that involved virtually every part of the
world during the years 1939–45. The principal belligerents were the Axis powers—Germany,
Italy, and Japan—and the Allies—France, Great Britain, the United States, the Soviet Union, and,
to a lesser extent, China. The war was in many respects a continuation, after an uneasy 20-year
hiatus, of the disputes left unsettled by World War I. The 40,000,000–50,000,000 deaths incurred
in World War II make it the bloodiest conflict, as well as the largest war, in history.

Along with World War I, World War II was one of the great watersheds of 20th-century
geopolitical history. It resulted in the extension of the Soviet Union’s power to nations of eastern
Europe, enabled a communist movement to eventually achieve power in China, and marked the
decisive shift of power in the world away from the states of western Europe and toward the United
States and the Soviet Union.

World War II
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World War II
1939–1945
Alternate titles: Second World War, WWII

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FAST FACTS
2-Min Summary
World War II, also called Second World War, conflict that involved virtually every part of the
world during the years 1939–45. The principal belligerents were the Axis powers—Germany,
Italy, and Japan—and the Allies—France, Great Britain, the United States, the Soviet Union, and,
to a lesser extent, China. The war was in many respects a continuation, after an uneasy 20-year
hiatus, of the disputes left unsettled by World War I. The 40,000,000–50,000,000 deaths incurred
in World War II make it the bloodiest conflict, as well as the largest war, in history.


World War II: Pacific Theatre of Operations
The Pacific Theatre of Operations, 1941–45.
Encyclopædia Britannica, Inc.



World War II: Germany invading Poland


See all media
Date: September 3, 1939 - September 2, 1945
Participants: Axis powers Belgium Free French Honduras Japan Netherlands United Kingdom
Yugoslavia Guatemala Allied powers ...
(Show more)
Major Events: Holocaust Normandy Invasion North Africa campaigns Pacific War Cowra
breakout
Key People: Winston Churchill Adolf Hitler Alessandro Pertini Franklin D. Roosevelt Joseph
Stalin
See all related content →
TOP BOOKS ABOUT
WORLD WAR II

World War II: The Definitive Visual History from Blitzkrieg to the Atom Bomb
by DK
View Full List on Amazon
Along with World War I, World War II was one of the great watersheds of 20th-century
geopolitical history. It resulted in the extension of the Soviet Union’s power to nations of eastern
Europe, enabled a communist movement to eventually achieve power in China, and marked the
decisive shift of power in the world away from the states of western Europe and toward the United
States and the Soviet Union.


Winston Churchill, Harry Truman, and Joseph Stalin
British Prime Minister Winston Churchill, U.S. Pres. Harry S. Truman, and Soviet Premier Joseph
Stalin meeting at Potsdam, Germany, in July 1945 to discuss the postwar order in Europe.
Encyclopædia Britannica, Inc.

atomic bombing of Hiroshima
A gigantic mushroom cloud rising above Hiroshima, Japan, on August 6, 1945, after a U.S.
aircraft dropped an atomic bomb on the city, immediately killing more than 70,000 people.
U.S. Air Force photograph


Axis initiative and Allied reaction
The outbreak of war
By the early part of 1939 the German dictator Adolf Hitler had become determined to invade and
occupy Poland. Poland, for its part, had guarantees of French and British military support should it
be attacked by Germany. Hitler intended to invade Poland anyway, but first he had to neutralize
the possibility that the Soviet Union would resist the invasion of its western neighbour. Secret
negotiations led on August 23–24 to the signing of the German-Soviet Nonaggression Pact in
Moscow. In a secret protocol of this pact, the Germans and the Soviets agreed that Poland should
be divided between them, with the western third of the country going to Germany and the eastern
two-thirds being taken over by the U.S.S.R.

Having achieved this cynical agreement, the other provisions of which stupefied Europe even
without divulgence of the secret protocol, Hitler thought that Germany could attack Poland with
no danger of Soviet or British intervention and gave orders for the invasion to start on August 26.
News of the signing, on August 25, of a formal treaty of mutual assistance between Great Britain
and Poland (to supersede a previous though temporary agreement) caused him to postpone the
start of hostilities for a few days. He was still determined, however, to ignore the diplomatic
efforts of the western powers to restrain him. Finally, at 12:40 PM on August 31, 1939, Hitler
ordered hostilities against Poland to start at 4:45 the next morning. The invasion began as ordered.
In response, Great Britain and France declared war on Germany on September 3, at 11:00 AM and
at 5:00 PM, respectively. World War II had begun.

Forces and resources of the European combatants, 1939

In September 1939 the Allies, namely Great Britain, France, and Poland, were together superior in
industrial resources, population, and military manpower, but the German Army, or Wehrmacht,
because of its armament, training, doctrine, discipline, and fighting spirit, was the most efficient
and effective fighting force for its size in the world. The index of military strength in September
1939 was the number of divisions that each nation could mobilize. Against Germany’s 100
infantry divisions and six armoured divisions, France had 90 infantry divisions in metropolitan
France, Great Britain had 10 infantry divisions, and Poland had 30 infantry divisions, 12 cavalry
brigades, and one armoured brigade (Poland had also 30 reserve infantry divisions, but these could
not be mobilized quickly). A division contained from 12,000 to 25,000 men.

Who won World War I? The Allies won World War I after four years of combat and the deaths of
some 8.5 million soldiers as a result of battle wounds or disease. Read more about the Treaty of
Versailles. In many ways, the peace treaty that ended World War I set the stage for World War II.

1.2 Economic growth and development

We have started our discussion of development by addressing very broad issues relating to the
concept of development. However, much of the literature and thinking about 'development'
focuses on economics. Indeed 'development' and 'economic development' have often been treated
as synonymous concepts. The economic development of a country or society is usually associated
with (amongst other things) rising incomes and related increases in consumption, savings, and
investment.

Of course, there is far more to economic development than income growth; for if income
distribution is highly skewed, growth may not be accompanied by much progress towards the
goals that are usually associated with economic development.

What characteristics are typically associated with economic development? Write down a list of
features that in your view might distinguish an economically developed country from one that is
not.


Clearly not all developed countries exhibit all these characteristics in equal measure. And, some of
you might even question the presence of certain items in the above list, pointing perhaps to
countries (or regions within them) in which, for example, crime and employment levels appear to
be quite high, or highlighting the fact that not everyone has access to good public services,
housing and so on. Some of these points are clearly open to debate. For instance crime levels in
the rural areas of many developing countries where most people live are often much lower than in
some of the urban population centres of developed countries. Nonetheless, the above list is
probably fairly indicative of the characteristics that distinguish countries that are economically
developed from those that are not.

Economic growth
From the answer to the previous question you will have noticed that the listed characteristics once
again say more about goals than the processes or mechanisms for achieving them. So what drives
a country towards achieving these goals? The orthodox view, espoused by most governments,
most major international organisations, and the economists that advise them, is that a big part of
the answer lies in economic growth.

However, economic growth can follow many different paths, and not all of them are sustainable.
Indeed, there are many who argue that given the finite nature of the planet and its resources, any
form of economic growth is ultimately unsustainable. We shall leave these debates for later. For
now let us look at what exactly economic growth is and how it is measured.

Economists usually measure economic growth in terms of gross domestic product (GDP) or
related indicators, such as gross national product (GNP) or gross national income (GNI) which are
derived from the GDP calculation. GDP is calculated from a country's national accounts which
report annual data on incomes, expenditure and investment for each sector of the economy. Using
these data it is possible to estimate the total income earned in the country in any given year (GDP)
or the total income earned by a country's citizens (GNP or GNI).

GNP is derived by adjusting GDP to include repatriated income that was earned abroad, and
exclude expatriated income that was earned domestically by foreigners. In countries where
inflows and outflows of this sort are significant, GNP may be a more appropriate indicator of a
nation's income than GDP.

There are three different ways of measuring GDP

the income approach

the output approach
the expenditure approach
The income approach, as the name suggests measures people's incomes, the output approach
measures the value of the goods and services used to generate these incomes, and the expenditure
approach measures the expenditure on goods and services. In theory, each of these approaches
should lead to the same result, so if the output of the economy increases, incomes and
expenditures should increase by the same amount.

Figures for economic growth are usually presented as the annual percentage increase in real GDP.
Real GDP is calculated by adjusting nominal GDP to take account of inflation which would
otherwise make growth rates appear much higher than they really are, especially during periods of
high inflation.

Short-term versus long-term growth

A distinction needs to be made between short-term growth rates and longer term ones. It is quite
normal for short-term growth rates to fluctuate in line with the business cycle.

According to the measures of GDP and growth shown here, growth in recent decades has
fluctuated between zero and 5% per annum. Clearly, based on long-term trends, growth rates
exceeding 5% (as measured here) would seem to be unsustainable. When politicians are talking
about sustainable growth they are often referring to macroeconomic concerns relating to the cycle
of boom and bust.
An economic boom involves high growth rates and is often accompanied by rising inflation. It is
often followed by a period of lower growth rates and recession ('bust'). Sustainable growth in this
context relates to stable growth rates that even out the fluctuations in the business cycle, thus
avoiding high peaks and the large troughs associated with recessions. Note that this is different
from the issues that environmentalists typically focus upon when they discuss the sustainability of
economic growth. We shall say more on this later.

Relationship between growth and development

Now take a moment to think about what GDP and GDP growth tell us about a country's level of
economic and social development.
Do high levels of GDP necessarily correspond with high levels of development? Not necessarily.
It is not aggregate GDP that is important, but GDP per capita. Countries like China and India have
much higher levels of GDP than, say, Singapore, New Zealand or Belgium, but few would suggest
that the latter are economically less developed than the former.

If GDP growth is to translate into higher GDP per capita, it has to outpace population growth.
Assuming that it does, is it reasonable to say that development is taking place?


Certainly, statistics reveal that the most developed countries are those with the highest GDP per
capita. Clearly, though, GDP per capita doesn't tell the whole story. GDP per capita is calculated
by dividing GDP by the population. It says nothing about how incomes are distributed or spent.
Growth in GDP per capita could result from growth in the incomes of richer groups in society,
with incomes of poorer groups remaining largely unchanged. It coincides with spending patterns
that are skewed towards the rich and which exclude the needs of the poor. It doesn't necessarily
follow that growth in per capita GDP will lead to a reduction in poverty or to broader social and
economic development. Indeed, there are those who argue, rightly or wrongly, that in many
countries economic growth is associated with increasing levels of poverty, rather than the reverse.

The relationship between economic growth and poverty is a hotly debated topic, about which
people are very divided. Some people highlight the negative effect of growth on low income
groups, stressing the need for new approaches to economic development that will allow the poor
to benefit more from economic growth than they do at present. Others are more sanguine,
believing that the benefits of current models for growth will eventually 'trickle down' to poorer
groups in society, if they are not already doing so.

Inequality
Most development professionals now believe that growth, at least in poorer countries, is essential
(but not always sufficient) for poverty reduction in the longer term. However, inequality is a
potentially important factor in determining how quickly and effectively growth reduces poverty,
with growth in countries that start out with high levels of inequality being less effective in
reducing poverty than it would be were inequality less pronounced (see Ravallion 2005). A
renewed interest in the role of inequality and efforts to reduce it appears to have entered the
development discourse since the global economic crisis of the late 2000s.

Much of the debate in this area revolves around the values and ideals of those engaged in it, as
well as the different theories on the subject. It also hinges upon interpretations of the empirical
evidence. Poverty and income distribution are hard to measure, especially in developing countries
where the capacity to gather and analyse data is often very weak. Consequently, the strength of the
statistical relationship between growth, poverty and inequality remains the subject of heated
debate. There is also controversy about the mechanisms by which economic growth may reduce
poverty, the timing of these and the policy implications. This has been heightened by the 'bottom
billion' debate (see 1.2.2).

1.2.2 The bottom billion

The bottom billion debate which revolves around the question of whether the poorest people (the
bottom billion) are to be found in the poorest countries ( see Collier 2007) or in fast growing
middle income countries (see Sumner 2010). The policy implications and the politics of tackling
poverty depend greatly on which perspective is taken in this debate. Should, for example,
international efforts to reduce poverty be focused on the poorest countries (much of sub-Saharan
Africa plus various failed states) or on reducing poverty in more densely populated parts of the
world (especially South Asia, but elsewhere too) where most of the world's poor now live, but
where average incomes in the countries they live in are much higher than in low income
countries? Some would argue that the poor in middle income countries should be the
responsibility of the national government concerned and international efforts should be
concentrated instead on countries where governments have far fewer resources at their disposal.
Others argue that this is to neglect the plight of the majority of the world's poor people.

Source: unit author.

GDP and purchasing power parity

An additional problem with GDP as a measure of development occurs when one compares per
capita GDP across countries. This problem arises because one US dollar in the United States or
Europe, for example, does not buy the same amount of goods and services as it would do in, say,
Africa or Asia. For many goods and services one dollar will purchase significantly more in a
developing country than it will in a developed one. To overcome this difficulty, economists often
use purchasing power parity (PPP) dollars when making cross-country comparisons of GDP.
These are dollars that are adjusted to account for the differences in purchasing power between
different countries.

Human development index

The weaknesses inherent in the use of GDP as a measure of development have led to the creation
of other measures. The most well known of these is the human development index (HDI)
published on a regular basis by The United Nations Development Programme (UNDP) in its
Human Development Report. The HDI is a composite index that rates countries according to their
overall performance in relation to three criteria
life expectancy
education
per capita GDP (using PPP dollars)
As noted earlier, these are related to fundamental freedoms to live and to participate in society.

UNDP publishes a number of different human development indicators, many of which are
composites of other weighted indexes. The main indexes are

human development index (HDI)

inequality adjusted human development index (IHDI)
gender inequality index (GII)
multidimensional poverty index (MPI)
gender empowerment measure (GEM).

Exploring human development indicators

Go to the UNDP website and see what you can learn about the HDI and other human development
indicators.

Try and find out where your country sits in the HDI rankings. How does it compare with the
performance of other countries that you are familiar with? Do the results surprise you and how do
you think they might be explained?

Also, see if you can find the latest Human Development Report. You might want to download this
for future reference.

You will also find information on the Millennium Development Goals at the UNDP site, if you
would like to learn more about these.