accounts demystified Summary balance sheet is the definitive statement of a company's financial The position. It tells you what a company's assets and liabilities are at a point in time and hence what the company's net assets are. It also tells you how the company came by those net assets. P&L is a descriptive statement. It tells you how and why the The retained profit item on the balance sheet changed over the course of the last year. cash flow statement is also a descriptive statement. It tells you The how and why the cash/overdraft as shown on the balance sheet changed over the course of the last year. can draw up descriptive statements for any other item on the You balance sheet. The only reason that the P&L and cash flow statement are given such prominence in an annual report is because they describe the most important aspects of a business.