Know which question each report answers.

Balance sheet: what is held and owed?

A balance sheet presents assets, liabilities, and owners' equity at a specific date. It is a snapshot rather than a summary of sales for the month.

For your review, mark balances you do not recognize and ask what supports them. A loan, an amount owed by a customer, or an owner balance may need a separate schedule. Ask which accounts have been reconciled before treating the report as final.

Profit and loss: what happened during the period?

An income statement, often called a profit-and-loss report, summarizes revenue and expenses over a period. Check the dates and accounting basis before comparing it with another report.

Instead of asking only whether the bottom line went up or down, select the changes that matter to your business. Was an unusual expense recorded? Did the period include a one-time event? Write those questions beside the relevant line so the discussion stays focused.

Cash-flow statement: where did cash move?

A cash-flow statement explains cash movements over a period. Profit and available cash are not interchangeable, so use the reports together rather than assuming one tells the whole story.

For a forward-looking decision, ask whether you need a separate cash projection. Historical reports describe completed periods; your next decision may depend on expected collections, upcoming payments, and assumptions that are not in those reports.

One simplified example: profit is not the bank balance.

These made-up figures illustrate the difference between the reports; they are not a client result. Assume an accrual-basis business has $6,000 cash and $10,000 in customer receivables at the start of the month.

During the month it earns $15,000 in revenue, incurs and pays $11,000 in expenses, and collects $13,000 from customers. There are no other cash movements or balance changes.

• Profit and loss: $15,000 revenue − $11,000 expenses = $4,000 profit.
• Cash movement: $6,000 opening cash + $13,000 collected − $11,000 paid = $8,000 closing cash.
• Receivables: $10,000 opening balance + $15,000 earned − $13,000 collected = $12,000 still owed by customers.
• At month-end, $8,000 cash + $12,000 receivables = $20,000 assets. If liabilities remain $10,000, equity is $10,000.

Bring three questions to the review.

Choose the figures or changes that affect a real decision. A short, specific question list is easier to work through than a general request to explain everything.

• Which balances are final, and which depend on missing information?
• What changed compared with a genuinely comparable period?
• What additional records or analysis would help with my decision?