Practice: linking the three statements and checking the balance sheet

Let's link the three statements of the Zerno coffee shop for 2026 ($ thousands) on one sheet. The P&L gives net income: revenue 200 − variable costs 68 − fixed costs 81.6 − depreciation 8 = EBIT 42.4; minus interest 2.4 and tax 10 — net income 30. Below are the cash flow statement and the balance sheet: item, beginning of year, end of year. Every link is a formula with references, so an error will surface in the check row. A worked step — operating cash flow by the indirect method: net income 30 plus depreciation 8 (an expense with no cash paid out) minus the increase in working capital 2 (cash stuck in inventory and receivables). They're in B2, B3, and B4, so B5 holds =B2+B3-B4 = 36. Next along the chain: • change in cash = the sum of the three cash flows; investing (−14) and financing (−18) are already entered with a minus sign; • ending cash = beginning cash + change in cash; • ending retained earnings = beginning + net income − dividends; • ending total assets = the sum of the asset items. The check is assets minus liabilities and equity (A − L − E). If the model is linked correctly, you get 0, and the IF flag shows “OK.” Any other number is a signal to look for the error, and the size of the gap hints at which link was missed.