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Learn: Using Income Statements and Balance Sheets Together
WJEC Eduqas GCE A LEVEL in BUSINESS specification
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Welcome!You've already learned about key financial concepts such as budget variances, working capital, and financial ratios. Today, we’ll build on that knowledge by exploring how income statementsbalance sheets work together to provide a full financial picture.
Why Use Both Statements Together?Income statements show a business’s profitabilityfinancial position
Income Statement RecapThe income statement reports revenueexpensesprofit
What does the income statement primarily show?
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Balance Sheet RecapA balance sheet shows a business’s assetsliabilitiesequity
How Do They Work Together?Income statements and balance sheets are interconnected. For example, a net profit on the income statement increases equity on the balance sheet. Similarly, expenses can reduce assets shown on the balance sheet.
The {{blank0}} statement shows profitability, while the {{blank1}} sheet shows financial position.
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Key Connections Between the Two1. 2. 3.
Which of the following are correct about the connection between income statements and balance sheets? (Select all that apply)
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Analysing Financial HealthBy using both statements, you can assess profitability, liquidity, and long-term sustainability. For example, a profitable business with high liabilities may still face risks.
Match the items on the left with their correct pairs on the right
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Review Time!Great work! You've learned how income statements and balance sheets interact. Now let's test your understanding of key concepts.
Which financial statement shows liabilities?
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Which of the following are assessed using income statements and balance sheets? (Select all that apply)
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Match the items on the left with their correct pairs on the right
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Well Done!Excellent work today! You've mastered how income statements and balance sheets complement each other. Keep practising to strengthen your understanding further.
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