How Is the Statement of Cash Flows Linked to the Other

Question

Examlex · Accepted Answer

The Answer is The net increase or decrease on the statement of cash flows is linked to the change in the cash balance from one year to the next on the company's comparative balance sheets. The statement of cash flows adds the beginning cash balance to the change in cash during the period (detailed by activity on the statement of cash flows) to determine the ending cash balance. The beginning and ending cash balances appear on the balance sheet as the current year and previous year's cash balances. Under the indirect method, net income from the income statement is the starting point for the determination of net cash inflows (outflows) for operating activities on the statement of cash flows. The amount of net income also appears on the statement of retained earnings, which computes the ending retained earnings balance on the balance sheet. The investing section of the statement of cash flows is closely related to the balance sheet in that it analyses changes in non-current assets. The financing section of the statement of cash flows is closely related to the liabilities and equity sections of the balance sheet because it analyses changes in non-current liabilities and equity accounts.

How Is the Statement of Cash Flows Linked to the Other

Definitions: