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How do the elements of the financial statements interact?

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1. In what ways do the elements of the four financial statements interact with one another

2. How might changing one of the financial statements affect the other financial statements?

3. Why is it essential to understand the relationship between the financial statements?

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Solution Summary

This discussion highlights how the elements of the four financial statements interact with one another, whether events change some of all of the statements and reveals the essential relationship among these reports using a visual chart that permits the students to see a working model to use in future assignment (not from any textbook).

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First, please see the attached "visual aid" where you see how transactions impact the balance sheet/income statement and cash flow statement all at the same time!

!. (As you can see on the attached...) The cash flow statements links to the balance sheet through the cash account. The income statement links to the balance sheet through the retained earnings account. The statement of changes in equity is an expansion ...

Solution provided by:
Carol Sargent, PhD
Education
  • BSc, University of Virginia
  • MSc, University of Virginia
  • PhD, Georgia State University
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