Tool · 09
Statement Linkage Simulator
Pick a transaction and watch it move through all three statements in the order the money actually moves. Quiz mode hides the last two and asks you to produce them, which is the drill that gets tested.
Depreciation goes up by $10.00. Nothing else changes.
Income statement
- Depreciation
- -$10.00
- Pretax income
- -$10.00
- Taxes
- +$2.50
- Net income
- -$7.50
Cash flow statement
- Net income
- -$7.50
- Depreciation add-back
- +$10.00
- Cash from operations
- +$2.50
- Net change in cash
- +$2.50
Balance sheet
- Cash
- +$2.50
- PP&E
- -$10.00
- Total assets
- -$7.50
- Retained earnings
- -$7.50
- Liabilities and equity
- -$7.50
Balanced. Assets moved -$7.50, liabilities and equity moved -$7.50.
- 01Income statement: depreciation is an expense, so pretax income falls $10.00 and net income falls $7.50 after the 25% tax shield.
- 02Cash flow statement: net income starts at -$7.50, then depreciation is added back at $10.00 because no cash left. Cash from operations rises $2.50.
- 03Balance sheet: cash rises $2.50, PP&E falls $10.00, retained earnings falls $7.50. Assets move -$7.50 and equity moves -$7.50.
The follow-upWhy does cash go up when the company just recorded a loss? Because the only real event was a tax deduction.
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Read how the statements connect →