Question

Your book this week discussed financial reporting, and the balance sheet. Discuss the interrelationship among the income statement, balance sheet, and statement of cash flows. Write a minimum of 250 and maximum of 300 words.

Answer 1

Answer - The three Financial statements are the Income statement, the Balance sheet, the Cash flow statement.These three core statements are intricately linked to each other.

Overview of three Financial statements 1.Income statement - The income statement shows the performance of the business through out each period, displaying sales revenue at the very top. The statement then deducts the cost of goods sold to find gross profit. 2. Balance sheet - The balance sheet displays the company's assets, Liabilities and shareholders equity. As communly known, assets must equal liabilities plus Equity. The assets section begins with cash & equivalents which should equal the balance found at the end of cashflow statement. The balance sheet then display the changes in each majoz account. 3. Cash flow statement - The cash flow statement then takes net Income and adjusts it for any non cash expenses.Then, using changes in the balance sheet, usage and receipt of cash is found.The cash flow statement displays the changes in cash per period, as well as the begnning balance and ending balance of cash.