The difference between an income statement and a balance sheet is usually explained as a difference of period, and that is true but not useful. The useful version, for anybody running a close, is that one of them is reconciled and the other is explained. This page sets out what each carries, why the reconciliation programme lives on the balance sheet, and what that means for how a close is planned.
What each one carries
The balance sheet carries positions at a moment: what is owned, what is owed, what has been paid in advance, what has been accrued. The income statement carries activity across a period: what was earned and what was consumed. Every income statement line is the movement in one or more balance sheet positions, which is why the two are not alternatives but two views of the same postings.
Why the reconciliations live on the balance sheet
Because a position can be proved against something outside the ledger and a period's activity generally cannot. Cash ties to a bank statement, receivables to a subledger, prepayments to a schedule, debt to a loan agreement. That external support is what a reconciliation is for. The income statement is reviewed by explanation instead, comparing this period to last and asking why the movement is what it is.
What that means for the close
The reconciliation programme is sized by the number of balance sheet accounts, not by revenue, headcount or transaction volume, which is why two companies of very different size can have the same close workload. The free worksheet on this site takes your account count and your close window and returns the hours the programme costs and what has to clear each day.
Where the two meet
At the error. A wrong balance sheet position is a wrong income statement figure somewhere, because the postings are the same. That is the practical reason reconciliations are worth the time: they are the only routine control that catches the mistake before it is in the number somebody reports.
Questions people ask about income statement vs balance sheet
Which statement do auditors ask about first?
Both, but the evidence they ask for is usually balance sheet reconciliations, because that is where support outside the ledger exists. What your auditor requires is between you and them.
Do income statement accounts ever get reconciled?
Some companies reconcile particular expense accounts to external support. The routine programme is a balance sheet programme, which is what this site sizes.
Is this accounting instruction?
No. It explains which statement a reconciliation touches and why, so a close can be planned. What a treatment should be is your accountants' judgement.