Profit & Loss

The Profit & Loss (P&L) statement, also known as the income statement, shows how much money the business made (revenue or income) and how much it spent (expenses) over a specific period, like a month or a year. The basic equation of a P&L is: Revenue - Expenses = Profit (or Loss if expenses are more than revenue).

Balance Sheet

Imagine a balance sheet like a snapshot or picture that shows all the things a business owns (assets) and all the things it owes (liabilities) at a specific moment in time. The basic equation of a balance sheet is: Assets = Liabilities + Owner's Equity.