Every business, no matter how small, is described by 3 documents. Accountants make them sound more complicated than they are. Underneath the terminology, each one is answering a single plain question.
I remember being completely lost the first time an accounting professor started talking about credits and debits. I sat there thinking about credit cards and debit cards, trying to figure out what my wallet had to do with any of it, until I actually read the chapter and realized it meant something else entirely. Once it clicked, it stuck. I still keep a version of the cheat sheet I made back then on my desk: assets and expenses increase with a debit, liabilities, equity, and income increase with a credit. If the terminology ever loses you the way it lost me, that short list is really the whole code to crack.
The income statement: did you make money?
The income statement, also called a profit and loss statement, covers a period of time, a month, a quarter, a year, and answers 1 question: did the business make money during that period? Revenue coming in, minus expenses going out, equals profit or loss.
That's it. Every line item on an income statement is either revenue or an expense. The number at the bottom is the answer.
The balance sheet: what are you worth right now?
The balance sheet is a snapshot, not a period. It answers a different question: as of this exact moment, what do you own and what do you owe? Assets (what you own) minus liabilities (what you owe) equals equity, which is what's actually yours.
A business, or a person, can be profitable on the income statement and still be in a weak position on the balance sheet, if too much of what they own is offset by what they owe.
The income statement covers a period. The balance sheet is a snapshot. One tells you how the trip went. The other tells you where you are right now.
The cash flow statement: where did the actual cash go?
This is the one most people skip, and it's often the most important. The income statement can show a profit even when cash is tight, because revenue gets counted when it's earned, not necessarily when it's actually paid. A business can be profitable on paper and still run out of cash, if customers are slow to pay or too much cash is tied up in inventory.
The cash flow statement tracks actual cash moving in and out: from operations, from investing (buying or selling equipment, for example), and from financing (loans, owner contributions, distributions). It's the reality check on the other 2 statements.
The personal finance version
You already have versions of all 3, even if you've never labeled them that way. A monthly budget is your income statement. A net worth calculation, what you own minus what you owe, is your balance sheet. Your actual bank balance, going up or down, is your cash flow. The same 3 questions apply: did I make money this period, what am I worth right now, and where did the actual cash go.
3 statements, 3 questions. The income statement asks if you made money. The balance sheet asks what you're worth right now. The cash flow statement asks where the actual cash went. Understand those 3 questions and you understand more about a business, or your own finances, than most of what gets taught as "accounting."