What may cause discrepancies between the Balance Sheet and the Profit and Loss report?

Discrepancies between the Balance Sheet and the Profit and Loss report can primarily arise from timing differences in recognizing income and expenses, as well as unrecorded transactions. The Balance Sheet reflects the company’s financial position at a specific point in time, detailing what is owned and owed, while the Profit and Loss report summarizes income and expenses over a defined period.

When income is recorded, it may not always align with the timing of actual cash flows or expenses being recognized, especially if accrual accounting principles are applied. For instance, revenue may be recognized at the point of sale even if the cash has not yet been received. Similarly, expenses may be recorded when incurred rather than when they are paid. Any unrecorded transactions or adjustments can also lead to further discrepancies, as these would affect one report without updating the other, resulting in differences between the two financial statements.

The other options provide scenarios that do not straightforwardly lead to the discrepancies in question. Currency settings, user preference changes, and data entry errors for bank transactions may lead to operational issues or reporting errors, but they do not inherently explain the regular discrepancies that occur between the Balance Sheet and the Profit and Loss report based on accounting principles.