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The Interaction Between Financial Statements

Financial Statements:

Balance Statement
Income Statement
Statement of Owner's Equity
Statement of Cash Flow

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

The company's periodic net income or loss is reported on its income statement. This amount is closed, or transferred, to the company's retained earnings, which is part of its owner's equity; owner's equity activity for the period is reported on the company's statement of owner's equity. The company's owner's equity balance at the end of the period is reported on its balance sheet at the same date. Finally, the company's income statement, statement of owner's equity and two periods' (i.e., the latest period-ending date and that immediately preceding it) of balance sheets are used to compile its statement of cash flows. (In ...

Solution Summary

Financial Statements:

Balance Statement
Income Statement
Statement of Owner's Equity
Statement of Cash Flow

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?

$2.19