Which one of the following statements best explains the most important difference between the balance sheet and the profit and loss statement? The income statement presents the economic and operational results of financial performance of firms by considering revenues and expenses over a specific operating period. The balance sheet reflects the financial condition with its sections on a particular date or specific point in time. The balance sheet is prepared on cumulative basis (over a period of time, such as year) but the income statement is not prepared on cumulative basis. The balance sheet shows the net profit or loss incurred over a specific operating period. The profit and loss statement shows the liquidity and solvency position of a particular company. The balance sheet proves and reflects the fundamental accounting equation but the income statement does not because it is cumulative