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Three Financial Statements

To show the financial performance and status of any business, three financial statements are required.

Man points to statements

The three statements are:

Income statement

Balance sheet

Cash flow

Each of the 3 financial statements have some data that is also shown in another of the statements!
Income statement

Example 1

Net profit after tax from the Income statement goes to the balance sheet

The Income statement starts with revenue and ends with Net profit after tax (“NPAT”).
The NPAT from the Income statement is shown in the balance sheet as follows:

Balance sheet

Opening retained income
Add: NPAT from the Income statement


Equals:
Closing retained income on the Balance sheet.

Income statement

Example 2

Totals of all the cash flows in the cash flow statement go to the balance sheet

The Cash flow statement lists all the cash inflows and outflows. The total of all the cash flows will be reflected in the bank account on the balance sheet.
Assuming there is one bank account, it is shown in the balance sheet as follows:

Balance sheet

Opening bank balance
Add: Net of all cash flows from the Cash flow statement

Equals:
Closing bank balance on the Balance sheet.

More information

To explore the three financial statements and their relationship to each other, please visit:
Balance Sheet Walk
  • Cash flow
  • Balance sheet
  • Profit & loss.
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