How much does the company owns (assets) and must pay (liabilities) and what is left for the owners (equity). You calculate the balance sheet at a certain date, it is a picture of your situation at a specific time.
To decide what belongs to the balance sheet ask yourself: if the company is bankrupt would the company be able to sell it or will have to pay for it? If the answer is yes, then the item belongs to the balance sheet.
Your home, bank account money, credit card dept are here.
Profit and Lose
How much (paper) money is generated by the business day to day.
You read a P&L from top to bottom, most of the time only the first line is a positive (revenue) and every other row, removes some money from it.
The usual order is: how much money is being generated by the doers (revenue), how much is consumed by sales (cost of sales) and the protector of doers (overhead), how much goes to tax and other accounting complexities (tax, interest, amortisation) and how much is the final profit/lose. (aka the bottom line). As the P&L is based on contract and invoices it is sometime referred as paper money, as opposed to Cashflow that follows real money.
How much is your salary
How much real money is in the bank. Simple.
A house, car, computer, bank account are all in the balance sheet as you would be able to sell them in case of bankruptcy. Credit cards due, mortgage are also in the balance sheet as you would still need to pay for them in case of bankruptcy. Salary is P&L as it would stop being generated if you stopped working Taxes are also in the P&L because they are mostly connected with the Salary Every bank transaction is recorded in the cashflow statement and will impact the
So if you buy a car, you spend money to get an asset you’ll be able to sell. Negative on cashflow, positive on balance sheet (new asset)