Video narration
With your own money, would you ask, "Did I earn and spend well?" or "What do I own and owe right now?" Businesses ask them too. Think of Profit and Loss, the P&L, as your money record for a period. It tracks revenue and expenses. Revenue minus expenses gives profit or loss, measuring performance over time. Here's the turn: these statements do not show the same information. The Balance Sheet is a snapshot on a date. It shows assets, what the business owns; liabilities, what it owes; and equity. So, assets equals liabilities plus equity. Profit is not cash, and the Balance Sheet is not a performance report. In exams, ask: is this about results during a period? Choose the P&L. Is it about financial position today? Choose the Balance Sheet. Did the business perform well? The P&L answers. What does it own and owe now? The Balance Sheet answers.