The relationship between the three is inseparable. First of all, look at the definitions of these three:
1. The balance sheet is filled directly or analytically according to the ending balance of the general ledger account.
2. The income statement is filled out according to the amount analysis of the profit and loss accounting subjects.
3. The cash flow statement is based on cash basis and cash and cash equivalents.
The relationship between the three is as follows:
(1) Undistributed profit in the income statement and profit distribution statement = Undistributed profit in the balance sheet.
(2) The difference between the ending balance and the opening balance of cash and its equivalents in the balance sheet = the net increase of cash and its equivalents in the cash flow statement.
(3) Net sales in the income statement-increase of accounts receivable (bills) in the balance sheet+increase of accounts received in advance = cash received from goods sold and services provided in the cash flow statement.
(4) Increase (decrease) of other current assets and liabilities except cash and its equivalents in the balance sheet = decrease (increase) of related items in the cash flow statement.
The preparation of cash flow statement has always been a difficult point in the preparation of enterprise statements. If all accounting entries are adjusted to cash basis according to the requirements of cash flow statement standards, it is equivalent to redoing a set of accounting entries, which will undoubtedly greatly increase the workload of financial personnel and lack maneuverability in practice. Therefore, many financial personnel hope to prepare the cash flow statement only according to the balance sheet and income statement, which is an extravagant hope. In fact, it is impossible to compile a cash flow statement only based on the balance sheet and income statement, and it is necessary to obtain relevant data according to the general ledger and subsidiary ledger.