How the Three Statements Connect
The Owner's Vault · Teaching Worksheet

How the Three Statements Connect

One month of activity, traced through every statement.
The same dollars appear in more than one place. That is not duplication.
It is the system tying itself together.

Tap any highlighted line to light up every place that figure appears across the three statements, and read the connection below. Or pick a thread:
Statement 01
Income Statement
For the month ended March 31
“Did we make a profit?”
Accrual basisThis period
Revenue earned $50,000
Operating expenses (cash)(34,500)
Depreciation (non‑cash) (5,000)
Interest expense (500)
Total expenses(40,000)
Net income $10,000
Revenue counts when earned, not when collected. That single rule is why profit and cash differ.
Statement 02
Cash Flow Statement
For the month ended March 31
“Where did the cash actually go?”
Accrual basisThis period
Operating activities
Net income (starting point) $10,000
Add back: depreciation +5,000
Less: increase in receivables (35,000)
Operating cash flow(20,000)
Investing activities
Equipment purchase (8,000)
Financing activities
Loan principal repaid (1,500)
Net change in cash ($29,500)
Beginning cash balance 60,000
Ending cash balance $30,500
Interest is not listed here separately. It already sits inside net income at the top. Counting it again would be double‑counting.
Statement 03
Balance Sheet
As of March 31
“What do we own and owe right now?”
Accrual basisOpeningClosing
Assets
Cash $60,000$30,500
Accounts receivable 20,00055,000
Equipment (net) 20,00023,000
Total assets100,000108,500
Liabilities & Equity
Loan payable 25,00023,500
Common stock25,00025,000
Retained earnings 50,00060,000
Total liab. & equity$100,000$108,500
Closing cash here is last month’s cash plus this month’s net change. The statements hand off, one to the next.
The Connection Select a highlighted line above
Every highlighted figure appears in at least two statements. Tap one to trace it.
Assets balance equity✓ 108,500 = 108,500
Cash flow ties to balance sheet✓ 60,000 − 29,500 = 30,500
Net income builds equity✓ 50,000 + 10,000 = 60,000
A teaching example. Build your own with Template 8A in The Owner’s Vault.