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Interrelationship between financial statements

Rohan Adhalakha (Finance Executive ) (53 Points)

26 March 2010

What is the inter relationship between financial statements like cash flow, income statement and balance sheet. Suppose if I purchase goods worth Rs.1,000 on credit. What will be the effect on all the financial statement.

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Varun.T.K (CA Final, CS Executive) (365 Points)
Replied 26 March 2010

Since the purchase of goods is on credit terms, it wont affect the cash flow. The purchase is refleted in Income Statement. Since, the goods are bought on credit, the creditors account will be presented in the Balance Sheet.