A basic cash-flow view
Objective: Classify cash movements and reconcile to the cash balance.
Recommended first: The balance sheet
A cash-flow view explains why cash changed. Operating activities come from running the business; investing from buying or selling long-lived assets; financing from owners and lenders. Opening cash + net change = closing cash.
A cash-flow view is built from cash entries: for each one, look at the other side to classify it. Customer collections and supplier payments are operating; equipment purchases are investing; owner investments, drawings, and loan principal are financing. Interest is commonly shown as operating in introductory material. The total change must reconcile opening cash to closing cash.
Check your work
- Is each cash movement classified by its counter-account?
- Do the three categories sum to the net change?
- Does opening cash plus the net change equal closing cash?
Owner investment $10,000 (financing), equipment $2,000 (investing), operating net −$600; cash rises $7,400.
| Account | Debit | Credit |
|---|---|---|
| Net change in cash | $7,400.00 |
Common mistakes
✗ Treating loan proceeds as operating cash.
✓ Borrowing is financing.
Guided practice
Use hints freely here.
Item 1 of 1
Balance sheet totals
Balances: Cash $5,700.00, Accounts Receivable $2,800.00, Equipment $8,500.00, Accumulated Depreciation $1,000.00, Accounts Payable $800.00, Notes Payable $500.00. Compute total assets, total liabilities, and owner's equity.
Independent practice
Try these without hints. Completing the lesson needs at least one independent item solved without revealing the answer.
Item 1 of 2
Compute net income
For the month: Service Revenue $14,600.00, Rent Expense $1,300.00, Wages Expense $5,100.00, Utilities Expense $230.00, Owner Drawings $1,650.00. Compute total expenses and net income.
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Key terms
- Cash-flow view
- How cash changed, by activity.
References and provenance
- OpenStax, Principles of Accounting, Volume 1: Financial Accounting (accessed 2026-10-29)
Original lesson written for Bookkeeping Exercises (AI-assisted drafting). Calculations are verified by the platform's automated accounting tests. Not yet reviewed by a credentialed accountant. Updated 2026-10-29.