The Balance Sheet is a statement of accounts that basically shows on a particular day what total assets and total liabilities plus owner’s equity is. The balance sheet is cumulative of all transactions that have occurred prior to the generation of the report – it is essentially a snapshot of the accounts, and is not targeted to a specified period of time like the income statement. From the Balance Sheet, one can determine the net worth of a company.
Lastly, the Statement of Cash Flows reflects Net increase or decrease in cash after adjustments. It helps clarify what may be considered as inconsistencies on the Income Statement. On page 34, the book tells us that if a company recognizes a $1 Million profit transaction on the Income Statement that it may not receive payment for during the year, the report would be overstated. By using the Statement of Cash Flows in conjunction with the other two reports, one can make the visual connections necessary for determining where the company’s money really is.