The Cash-Adjusted Income Statement (3)
Posted on November 27, 2008 - Filed Under Uncategorized
While the balance sheet and income statement are constructed—that is, built up from the transaction level as sales and other business events are recorded in a journal and then
successively carried over to ledgers, trial balance sheets and finished statements—the cash-flow statement is deconstructed. Instead of assembling a cash flow from the ground up, the balance sheet and income statement are deconstructed into their components, then rearranged to tell the story of cash flow from pieces that were originally put together to tell the story of value flow. Knowing and understanding the valueflow story is important, of course, but it is incomplete without an understanding of the cash-flow story.
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