Consolidating two balance sheets


Building on the previous example, suppose you decided to sell your car for $10,000.In this case, your asset account will decrease by $10,000 while your cash account, or account receivable, will increase by $10,000 so that everything continues to balance. If you wish to learn more, check out .) If the balance sheet you're working on does not balance, this should be a red flag that there is likely a problem with one or more entries.Now, we combine the three sections of the cash flow statement to see where the firm is from a cash flow perspective.When you sum the net cash flows from each section you get a positive $5,500.



In order to analyze the financial statements for a business, more information is needed from the balance sheets.Here's the rule you should always remember when developing your Statement of Cash Flows: Increases in current asset accounts, decrease cash.Decreases in current asset accounts, increase cash.Dividends to investors in the amount of $65,000 have also been paid, which is a cash outflow and a negative number.

Net Cash Flows from Financing Activities is a negative $15,000.

The owner must look at the last two years of the firm's balance sheets and compare the differences between the two in order to develop the Statement of Cash Flows.



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