Discussion board Unit 4 Forum With regard to financial repor

Discussion board

Unit 4 Forum With regard to financial reporting, what is the link between the Income Statement, Balance Sheet, 149 and Statement of Cash Flow? How does a change in sales volume or merchandise cost affect all three (pick one)?

Solution

The income statement is one of the major financial statements used in the business for calculating the profitability of the business. In income statement there is two Parts at one parts whatever the income or earning from the business will show it may be primary income or secondary income all the income should be shown at right side of income statement.

So All the income earned and expenses incurred of the business will route through this statement and is called income statement. Balance after the all income and expenses will transfer to the balance sheet of the comoany.

Balance sheet Shows the total Assets and liabilities and shareholder’s equity in the organization. IT is shows the real value of the organization. By valuing the balance sheet we know the what is the company have the worth. Balance sheets are mainly divided in Five activities which are as below

So balance remaine aftet the income and expenses will showin in the balance sheet in owner;s equity section.

So income statement and Balance sheet have the direct relationship for the Owner;s Equity section of Balance sheet. When there is profit than owner\'s Equity will increase and when there is loss than owner\'s equity will decrease.

And Cash flow statement will depend on the both of income statement and balance sheet.because every cash outflow and inflow from the income statment will increase and decrease the cash flow. And the every changes in the balance sheet in assets and liabilty will increase and decrease the cash flow.

Ex; Lets there is increase in the sales in last period and cash collected immediately. So it will affect to all the 3 statement in the income statement revenue will increase and in Balance sheet the Owner\'s Equity will increase and in the cash flow statement cash balance will increase