Ending cash balance on the cash flow statement corresponds to what on the balance sheet?

• A. The cash balance on the new balance sheet
• B. The beginning cash on the old balance sheet
• C. The cash balance on the income statement
• D. Net income

Answer: (A)

The ending cash balance on the cash flow statement is the cash you show on the balance sheet at the end of the period—the new balance sheet. The cash flow statement starts with beginning cash and adjusts for cash in or out through operating, investing, and financing activities to arrive at ending cash, which then appears as the cash asset on the period-end balance sheet. The opening balance on the old balance sheet is only the starting point, not the ending figure. The cash balance on an income statement isn’t a line item at all, since the income statement reports revenues and expenses, not cash. Net income is a profitability measure on an accrual basis and can differ from cash due to non-cash items and working capital changes; it is not the cash balance itself.