Three Statements, Three Jobs
The income statement, balance sheet, and cash flow statement each answer a different question over a different time frame.
- ✓State what each of the three statements measures
- ✓Distinguish a period statement from a point-in-time snapshot
Every company reports three core financial statements. They are not three versions of the same thing - each answers a distinct question.
| Statement | Answers | Time frame |
|---|---|---|
| How profitable was the business? | Over a period (a quarter/year) | |
| What does it own and owe right now? | A snapshot at one date | |
| Where did the cash actually go? | Over a period (a quarter/year) |
The income statement and cash flow statement cover a span of time. The balance sheet is a photograph at the last instant of that span. Two balance sheets (start and end) bracket the period the other two statements describe.
The standard under which revenue is recorded when it is earned and expenses when they are incurred - regardless of when cash changes hands. It is why the and the can tell different stories.
Which statement is a snapshot at a single point in time rather than a measure over a period?