Introduction to Accounting

9.3. Presentation of the balance sheet

The balance sheet is presented as follows:

Illustration 11: Balance sheet for Friends Company

Friends Company
Balance Sheet
Period Ended 20X6



Total Assets








      Contributed Capital


      Retained Earnings


Total Equity




Total Liability and Equity (Claims)


The balance sheet lists assets and corresponding claims (liabilities and equity). Any asset has a source, so assets balance with claims. That is why total assets equal the sum of total liabilities and equity.

9.4. Presentation of the statement of cash flows

The statement of cash flows has the following format:

Illustration 12: Statement of cash flows for Friends Company

Friends Company
Statement of Cash Flows
For the Period Ended 20X6

Cash Flows from Operating Activities


      Cash Receipts from Customers


      Cash Payments for Expenses


Net Cash Flow from Operating Activities




Cash Flows from Investing Activities




Cash Flows from Financing Activities


     Cash Receipts from Borrowing


     Cash Receipts from Capital Acquisitions


     Cash Payments for Distributions


Net Cash Flow from Financing Activities




Net Increase in Cash


Plus: Beginning Cash Balance




Ending Cash Balance


The statement of cash flows explains how the company obtained and used cash during a period. Sources of cash are called cash inflows, and uses of cash are known as cash outflows.

Cash inflows are sources of cash; for example, payments from customers, capital acquisitions, etc.

Cash outflows are uses of cash; for example, payments to vendors, paying off bank loans, etc.

The statement classifies cash inflows and outflows into three categories:

  • Operating activities explain cash generated through revenue and cash spent for expenses.
  • Investing activities include cash received or spent on productive assets and investments in the debt or equity of other companies.
  • Financing activities describe cash transactions associated with resource providers (i.e., owners and lenders.)

Illustration 13: Cash flow categories

Cash flow categories

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