USA Interrelationship of the cash flow statement to the other financial statements.


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Each statement works independently, but each of the four statements is connected directly or indirectly. Can anyone explain how they are connected?
 
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Steve-LevelUp

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If this is an study question, then we ask that you attempt to answer yourself. In what way do you think they are connected? how does a change in one affect the other?
 
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From my understanding and reading, the balance sheet is directly related to the statement of cash flows, the income statement and the statement of changes in equity. Income Statement directly links to the cash flow statement, the balance sheet and the statement of changes in equity. The changes of net assets from the profit and loss as reported in the income statement is also in the balances reported in the balance sheet for the period end. The profit and loss in the income statement are recorded in the cash flow statement. I get that each financial statement has a total that is shown on another statement. But sounds oversimplified.
 
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Here's a short breakdown:

1. Balance Sheet
- The Balance Sheet reflects assets, liabilities, and equity.
- Changes in assets, liabilities, and equity (month over month for example) are reflected on the Cash Flow statement under the assumption that they changed because of cash movement.

2. Income Statement
- The Income Statement reflects income and expenses. Ending Net Income or Net Loss will change the balance in ending equity on the Balance Sheet.
- Consequently, the change in equity on the Balance Sheet will be reflected on the Cash Flow Statement.

3. Member's Equity Statement
- The Member's Equity Statement reflects changes in equity. This will include Net Income and any debits or credits to equity; typically in the form of distributions and contributions (respectively).
- Your ending equity here should agree to the ending equity on the Balance Sheet.

4. Cash Flow Statement
- As mentioned above, the Cash Flow Statement reflects changes on the Balance Sheet (usually month over month) as a result of cash movement. Also mentioned above, equity will change because of Income Statement changes and Member's Equity changes (cash contributions or distributions) and those changes will be reflected here as well as other changes in assets and liabilities on the Balance Sheet.
 

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