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![]() The cash flow statement separates cash inflows and outflows into three categories. These differences occur when a company uses the accrual method of accounting. The statement of cash flows helps a business owner understand the differences between net income and the activity in the cash account. If you create a June cash flow statement, for example, the June 30 cash balance in the cash flow statement equals the cash balance in the June 30 balance sheet. The net income balance in the income statement increases the owner’s equity balance in the balance sheet.Ī cash flow statement lists the cash inflows and outflow of cash for a period of time, and the ending cash balance is the same dollar amount reported in the balance sheet. An income statement reports revenue, expenses, and net income for a specific period of time. The two other financial statements are connected to the balance sheet. The balance sheet lists a firm’s assets, liabilities, and owner’s equity balances for a month or year.
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