The effects of financial transactions on the three major forms of financial statements: balance sheet, income statement, cash flow statement, are important to understand the financial performance of any corporations. While most effects are intuitively understood, a few deserve special attention.
Depreciation: if depreciation amount and tax rate were 100 and 20%, respectively, then the net income would fall by 80. However, on the cash flow statement, there will be an increase of 20 in cash flow from operations. This is because the cash flow statement starts from the net income and adds back the full amount of depreciation. The depreciation itself caused no change in cash amount. The tax deduction from the depreciation allowed for more cash to be retained. Combining this all on the balance sheet, there would be 20 increase in cash and 100 decrease in net PPE. This 80 decrease is matched by the 80 decrease in equity, given the depreciation expense of 80.
Loss / gain on sale: if there was 100 loss on sale and given 20% tax rate, earning before tax would decrease by 100, and similarly net income would fall by 80. Assets would fall initially by 100 but with only 80 decrease in equity, the 20 is matched by increase in cash from not having to pay the additional tax, in similar fashion to depreciation. On the reverse, 100 gain on sale would only increase assets and equity by 80, given the additional tax expense.
