Walk me through the three statements.

Answer

Mechanics

The standard answer every junior has to master — the 60-second version:

'The income statement shows profitability over a period — revenue minus expenses gives net income.

The balance sheet shows what the company owns at a point in time and how it is financed — assets = equity + liabilities.

The cash flow statement shows cash movements over a period in three sections: operating, investing, financing.

Linkage: net income from the income statement is the starting point of the cash flow statement (indirect method) and, after dividends, flows into retained earnings on the balance sheet. The change in cash at the bottom of the cash flow statement goes into the cash line on the balance sheet.'

Deep diveShow more details

Pitch tip

This question is mandatory — if you stumble here, the interview is effectively over. Practice until you can do it in your sleep, cleanly structured, no longer than 60–90 seconds.

← PreviousWhat does the cash flow statement show?Next →How is the income statement structured under IFRS — nature-of-expense vs. cost-of-sales method?

Back to Accounting