I spent four years in college learning accounting which, in summary (to spare you the gory details), basically means I spent four years learning "the equation":

Assets = Liabilities + Stockholder's Equity

It sounds fancy, but it isn't. The sum total of a company is what's owned plus what's owed. If you have a company worth $100, but $50 of that is on a credit card, it means half of the company is leveraged.

This makes for a great snapshot of the worth of a company is at any given point in time. When you look at how it performed in a certain period, you turn to the income statement. Sales - Cost = Profit, in a nutshell. That's the income statement.

As far as the accounting equation goes, there is no equivalent expression for the income statement. Personally, I think there should be. One simple reason: in every sale a company makes, there is a liability. There's a debt. Maybe it's one of gratitude, but the customer is behind the sale. It doesn't matter how much work went into the sale...the customer made the decision, and the company has a liability. It has a debt. It has an obligation.

It's when companies forget this simple fact, and start playing tricks with the numbers, that they start getting into big trouble.