Question

3.1 What is the major connection between the statements of financial position and performance?

3.1 What is the major connection between the statements of financial position and performance?

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Answer #1

The Statement of financial position and Statement of Performance are very interrelated. Some points of connections between the two statements are below:

  1. The bottom line of the Statement of Financial Performance is Net Income which links it to Statement of Financial Position as Net Income flows into Stock Holders Equity as Retained Earnings.
  2. The Purchase, Sales or Other Disposition of Assets appears both in Statement of Performance and Statement of Financial Position
  3. Statement of Financial Performance demonstrates how well the Company/Entity has been able to utilize the Assets and Liabilities in the Statement of Financial Postion during the year
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