{"id":136,"date":"2018-04-16T20:38:25","date_gmt":"2018-04-16T20:38:25","guid":{"rendered":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/?post_type=chapter&#038;p=136"},"modified":"2024-04-26T22:17:51","modified_gmt":"2024-04-26T22:17:51","slug":"relationships-between-key-financial-statements","status":"publish","type":"chapter","link":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/chapter\/relationships-between-key-financial-statements\/","title":{"raw":"Relationships Between Financial Statements","rendered":"Relationships Between Financial Statements"},"content":{"raw":"<div class=\"textbox learning-objectives\">\r\n<h3>Learning Outcomes<\/h3>\r\n<ul>\r\n \t<li>Analyze the relationships between key financial statements<\/li>\r\n<\/ul>\r\n<\/div>\r\n<h2>Income Statement<\/h2>\r\nThe Income Statement is also called the Earning Statement or the Profit and Loss Statement, sometimes shortened to the P&amp;L, but no matter what it is called, net income or loss is always the bottom line. This bottom line flows to the next statement, the Statement of Owners\u2019 Equity. That is why it is the first statement to be compiled from the adjusted trial balance.\r\n<h2>Statement of Owners\u2019 Equity<\/h2>\r\nThe Statement of Owners\u2019 Equity reconciles beginning capital to ending capital. Remember that the Balance Sheet shows that assets are equal to liabilities plus equity. Ending capital and equity are synonymous, so the bottom line from the Statement of Owners\u2019 Equity, ending capital, flows to the next statement\u2014the Balance Sheet.\r\n<h2>Balance Sheet<\/h2>\r\nNet income from the Income Statement flows to the Statement of Owners\u2019 Equity, and the ending capital balance flows from the Statement of Owners\u2019 Equity to the Balance Sheet.\r\n<h2>Statement of Cash Flow<\/h2>\r\nFinally, the statement of cash flows reconciles beginning cash and cash equivalents from the balance sheet (ending cash from the prior set of financial statements) to ending cash from the current balance sheet, effectively reconciling accrual basis accounting to cash basis.\r\n<div class=\"textbox tryit\">\r\n<h3>Practice questions<\/h3>\r\nhttps:\/\/assess.lumenlearning.com\/practice\/e2a576ef-fe45-4372-aacd-36ea7ef86060\r\n<\/div>","rendered":"<div class=\"textbox learning-objectives\">\n<h3>Learning Outcomes<\/h3>\n<ul>\n<li>Analyze the relationships between key financial statements<\/li>\n<\/ul>\n<\/div>\n<h2>Income Statement<\/h2>\n<p>The Income Statement is also called the Earning Statement or the Profit and Loss Statement, sometimes shortened to the P&amp;L, but no matter what it is called, net income or loss is always the bottom line. This bottom line flows to the next statement, the Statement of Owners\u2019 Equity. That is why it is the first statement to be compiled from the adjusted trial balance.<\/p>\n<h2>Statement of Owners\u2019 Equity<\/h2>\n<p>The Statement of Owners\u2019 Equity reconciles beginning capital to ending capital. Remember that the Balance Sheet shows that assets are equal to liabilities plus equity. Ending capital and equity are synonymous, so the bottom line from the Statement of Owners\u2019 Equity, ending capital, flows to the next statement\u2014the Balance Sheet.<\/p>\n<h2>Balance Sheet<\/h2>\n<p>Net income from the Income Statement flows to the Statement of Owners\u2019 Equity, and the ending capital balance flows from the Statement of Owners\u2019 Equity to the Balance Sheet.<\/p>\n<h2>Statement of Cash Flow<\/h2>\n<p>Finally, the statement of cash flows reconciles beginning cash and cash equivalents from the balance sheet (ending cash from the prior set of financial statements) to ending cash from the current balance sheet, effectively reconciling accrual basis accounting to cash basis.<\/p>\n<div class=\"textbox tryit\">\n<h3>Practice questions<\/h3>\n<p>\t<iframe id=\"assessment_practice_e2a576ef-fe45-4372-aacd-36ea7ef86060\" class=\"resizable\" src=\"https:\/\/assess.lumenlearning.com\/practice\/e2a576ef-fe45-4372-aacd-36ea7ef86060?iframe_resize_id=assessment_practice_id_e2a576ef-fe45-4372-aacd-36ea7ef86060\" frameborder=\"0\" style=\"border:none;width:100%;height:100%;min-height:300px;\"><br \/>\n\t<\/iframe>\n<\/div>\n\n\t\t\t <section class=\"citations-section\" role=\"contentinfo\">\n\t\t\t <h3>Candela Citations<\/h3>\n\t\t\t\t\t <div>\n\t\t\t\t\t\t <div id=\"citation-list-136\">\n\t\t\t\t\t\t\t <div class=\"licensing\"><div class=\"license-attribution-dropdown-subheading\">CC licensed content, Original<\/div><ul class=\"citation-list\"><li>Relationships Between Financial Statements. <strong>Authored by<\/strong>: Freedom Learning Group. <strong>Provided by<\/strong>: Lumen Learning. <strong>License<\/strong>: <em><a target=\"_blank\" rel=\"license\" href=\"https:\/\/creativecommons.org\/licenses\/by\/4.0\/\">CC BY: Attribution<\/a><\/em><\/li><\/ul><\/div>\n\t\t\t\t\t\t <\/div>\n\t\t\t\t\t <\/div>\n\t\t\t <\/section>","protected":false},"author":62559,"menu_order":12,"template":"","meta":{"_candela_citation":"[{\"type\":\"original\",\"description\":\"Relationships Between Financial Statements\",\"author\":\"Freedom Learning Group\",\"organization\":\"Lumen Learning\",\"url\":\"\",\"project\":\"\",\"license\":\"cc-by\",\"license_terms\":\"\"}]","CANDELA_OUTCOMES_GUID":"1524db92-f6f4-4d6c-a292-f67e1dce6a18, 5f7db861-4c5d-4bfd-9306-5cdb0ab391ef","pb_show_title":"on","pb_short_title":"","pb_subtitle":"","pb_authors":[],"pb_section_license":""},"chapter-type":[],"contributor":[],"license":[],"class_list":["post-136","chapter","type-chapter","status-publish","hentry"],"part":103,"_links":{"self":[{"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/pressbooks\/v2\/chapters\/136","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/pressbooks\/v2\/chapters"}],"about":[{"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/wp\/v2\/types\/chapter"}],"author":[{"embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/wp\/v2\/users\/62559"}],"version-history":[{"count":15,"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/pressbooks\/v2\/chapters\/136\/revisions"}],"predecessor-version":[{"id":4033,"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/pressbooks\/v2\/chapters\/136\/revisions\/4033"}],"part":[{"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/pressbooks\/v2\/parts\/103"}],"metadata":[{"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/pressbooks\/v2\/chapters\/136\/metadata\/"}],"wp:attachment":[{"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/wp\/v2\/media?parent=136"}],"wp:term":[{"taxonomy":"chapter-type","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/pressbooks\/v2\/chapter-type?post=136"},{"taxonomy":"contributor","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/wp\/v2\/contributor?post=136"},{"taxonomy":"license","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/wp\/v2\/license?post=136"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}