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How do the income statement and balance sheet connect and interact? Which financial statement is more important: the balance sheet or the income statement? The answer is: both! They each have their own focus and purpose. This video provides you a deep understanding in less than five minutes. The balance sheet is an overview of a companys assets and liabilities at a point in time, usually the end of a quarter or the end of the year. A balance sheet shows you what a company owns (on the left hand side), and what a company owes (on the right hand side). As the term balance sheet suggests, the total assets should match the total liabilities, what we own equals what we owe. A balance sheet shows you where you got the capital for the company (on the right), and what you have invested it in (on the left). The income statement, or profit and loss statement, is an overview of how much a company has earned during a period. Some companies use the terms revenue, expenses and profit. Others use