A company reports its results in a set of financial statements — standard tables that investors, lenders and regulators all read. There are three main ones, and each answers a different question.
Three reports, three questions
| Statement | The question it answers | Time view |
|---|---|---|
| Income statement | Did the business earn a profit this period? | A period (a year or a quarter) |
| Balance sheet | What does it own and owe right now? | A point in time (the last day) |
| Cash flow statement | Where did cash come from and go? | A period (a year or a quarter) |
Each statement looks at the same business from a different angle.
Notice the third column: two of the statements cover a span of time, while the balance sheet is a single moment. This difference is one of the most useful ideas to hold on to.
Indian financial year
A video and a photograph
Think of the income statement and cash flow statement as short videos of the year: they show what happened across the period. The balance sheet is a photograph taken on the last day, freezing the position at that instant.
- The income statement is like a report card for the period: revenue earned, costs, and profit.
- The balance sheet is like a snapshot of everything owned and owed on one date.
- The cash flow statement is like a bank passbook: real money moving in and out.
The three statements are one story
Each statement answers a different question — together they describe the whole business.
Income statement
- Covers a period of time (e.g. a quarter or a year).
- Starts with revenue and subtracts costs step by step.
- Ends at net profit — which flows into retained earnings on the balance sheet.