Link between IS, CF and BS

Cash flow statement 

  • Reconcile beginning and ending balance of cash over accounting period 
  • Link between CF and IS: Change in cash balance is results of 
    • Operating activities: 
      • Relating to the firm’s current assets and current liabilities
    • Investing activities 
      • Relating to the firm non-current assets
        • Asset that company expect to hold for more than 1 fiscal year
    • Financing activities
      • Relating to the firm’s non-current liabilities and equity
  • Link between CF and BS: Each transaction affect each balance sheet account
    • Transactions for which timing of revenue or expense recognition differs from receipt or payment of cash reflected in change in balance sheet accounts
      • Accounts receivable increase/ decrease when sales increase/cash collection increase
      • Accounts payable increase or decrease when purchase increase/ payment increase