Basically after the derivation of net income from income statement, it is added in the statement of Changes in Equity. The whole amount that is achieved from addition of net income in the statement of changes in equity is added in the ending retained earnings of balance sheet. The total retained earnings of balance sheet includes the previous plus new earnings that's why we did this. In the cash flow statement, operating income from activities is used in the income statement. In this way financial statements are tied together.
