The Three Financial Statement
The balance sheet, the income statement, and the cash flow statement are interlinked and depend on each other. The information contained in the three financial statements is essential for calculating the financial ratios that a company uses to gauge its performance and uncover any underlying issue that needs addressing. All three statements convey the company’s operating activities. Net income that features in the income statement interlinks with the two other statements. Net incomes feed into retained earnings on the balance sheet but are the starting point for the cash from the operations section. Changes in current assets and current liabilities on the balance sheet are linked to the revenues and expenses on the income statement. However, they need adjusting on the cash flow statement to reflect the actual amount received or spent b the company. Therefore an accountant needs to create a section that calculates the changes in the networking capital.
References
Corporate finance Institute. (n.d). How are the three financial statements linked? Retrieved from https://corporatefinanceinstitute.com/resources/knowledge/accounting/3-financial-statements-linked/