🔥RELATIONSHIP BETWEEN FINANCIAL STATEMENTS [PART : 1]🔥

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ALL ABOUT ACCOUNTING : 46th BLOG

         💎ACCOUNTING💎

★ Accounting exercise and practices : 
Lesson : 5 [Part : 1]

Hi friends 🙏

Today's discuss Relationship between Financial Statements. 

                             So let's discuss ....

* RELATIONSHIP BETWEEN FINANCIAL STATEMENTS :

The financial statements are comprised of the income statement, balance sheet, and statement of cash flows. These three statements are interrelated in several ways, as noted in the following points:

  1. THE INCOME STATEMENT :
  • The net income figure in the income statement is added to the retained earnings line item in the balance sheet, which alters the amount of equity listed on the balance sheet.
The income statement is a financial report that shows an entity's financial results over a specific period of time. The time period covered is usually for a month, quarter, or year, though it is possible that partial periods may also be used. This is the most commonly-used of the financial statements, and is the most likely statement to be distributed within a business for management review. The general classifications of information noted on the income statement are as follows:
  1. REVENUE 
  2. COST OF SOLD GOODS
  3. GROSS MARGIN (Revenue - cost of goods sold) 
  4. Selling,  general and administrative expenses 
  5. Operating income 
  6. Other income and expense 
  7. NET INCOME or NET LOSS
The selling, general and administrative expenses may be aggregated by department, or by the nature of the expenses being reported.

The information in the income statement may be paired with budgeted revenue and expense information, along with a variance column stating the difference between actual and budgeted results. Also, if a company is publicly-held, basic and diluted earnings per share must be stated on the face of the income statement.

The income statement is part of the financial statements, of which the other components are the balance sheet and statement of cash flows.

☆ SIMILAR TERMS :

The income statement is also known as the profit & loss statement, or P&L.




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