ASSETS VS LIABILITIES AND HOW TO READ AN INCOME STATEMENT

Do you know the difference between assets and liabilities? And have you ever heard of an income statement?

These are important concepts to understand if you want to be financially savvy.

First, let’s talk about assets and liabilities. An asset is something that puts money in your pocket. It’s like a money-making machine! For example, if you own a rental property and collect rent from tenants, that property is an asset because it generates income for you.

On the other hand, a liability is something that takes money out of your pocket. It’s like a money pit! For example, if you have a car loan, you have to make monthly payments, which is money going out of your pocket. That car loan is a liability.

Now, let’s talk about the income statement. An income statement is like a report card for your money. It shows how much money you earned (called revenue) and how much money you spent (called expenses). The difference between the two is called net income. If your expenses are higher than your revenue, you have a net loss.

When you understand the concept of assets and liabilities, you can use the income statement to see if you’re making money or losing money. You want to make sure you have more assets than liabilities, so that you’re bringing in more money than you’re spending.

In conclusion, assets and liabilities are important concepts to understand if you want to be financially successful. An income statement can help you see if you’re making money or losing money. By focusing on building assets and reducing liabilities, you can improve your financial situation and achieve your goals