The Annual Operating Statements: The Income Statement and Cash Flow Statement
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The balance sheet of a company and the income statement are related. The balance sheet is an accounting snapshot at a point of time. The income, profit and loss, or operating statement is a condensation of the firm’s operating experiences over a given period of time. It depicts certain changes that have occurred between the last balance sheet and the present one. The balance sheet (position statement) and the income statement may be reconciled through the retained earnings, or earned surplus, account. If this reconciliation is presented formally, it becomes the surplus statement.
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