How the Three Financial Statements Connect
Balance sheet, income statement, cash flows
0:56 · 720p · With AI narration and captions. This sample was made with the same system as this service.
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How 3 Statements Connect
A company's results and financial position are shown in three financial statements. Let's see how they connect.
The Balance Sheet
The balance sheet shows the financial position at one point in time. Assets on one side, and liabilities plus equity on the other, always balance.
The Income Statement
The income statement shows results over a period of time. Take revenue, subtract expenses, and what's left is profit.
Profit Goes to Equity
The profit for the period adds to equity on the balance sheet as retained earnings.
The Cash Flow Statement
The cash flow statement shows cash coming in and going out over a period, split into operating, investing, and financing.
Cash Changes Match
The combined change in cash from all three, and the balance sheet's gap between opening and closing cash, always match.
The Three Are Connected
Profit builds up in equity, and the change in cash matches the balance sheet. The three statements are all connected.
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