ACC 230 Week 5 DQ1 - 7389

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In what ways does the statement of cash flows relate to the balance sheet and income statement?

The statement of cash flows relates to the income statement by reconciling net income. In the cash flows from operating activities section of the statement of cash flows, net income (from the income statement) is reconciled to the actual cash received or used in its' operating activities. Net income is adjusted by adding back non-cash items; such as depreciation, and is adjusted for any cash provided or used by other operating assets or liabilities.
The statement of cash flows relates to the balance sheet by recognizing the amount of cash entering and leaving the company, which directly affected the balances reported on the balance sheet. The cash flows listed are separated into three categories: operating activities, investing activities, and financing activities. The amounts recorded on the cash flows statement should equal the amount reported on the balance sheet (inflows minus outflows) for that period. Hence, the balance sheet lists account balances at the end of the period and the cash flow statement breaks down those balances by indicating the inflows and outflows during the reported period that directly affected each account.

Solution Description

In what ways does the statement of cash flows relate to the balance sheet and income statement?