9.3. Presentation of the balance sheet The balance sheetis presented as follows: Illustration 11: Balance sheet forFriends Company Friends Company Balance Sheet Period Ended 20X6 Assets $8,500 Total Assets 8,500 Liabilities 2,000 Equity Contributed Capital 5,000 Retained Earnings 1,500 Total Equity 6,500 Total Liability and Equity (Claims) 8,500 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 flowshas 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 $3,000 Cash Payments for Expenses (1,000) Net Cash Flow from Operating Activities 2,000 Cash Flows from Investing Activities 0 Cash Flows from Financing Activities Cash Receipts from Borrowing 2,000 Cash Receipts from Capital Acquisitions 5,000 Cash Payments for Distributions (500) Net Cash Flow from Financing Activities 6,500 Net Increase in Cash 8,500 Plus: Beginning Cash Balance 0 Ending Cash Balance $8,500 The statement of cash flows explains how the company obtained and used cash during a period. Sources of cash are calledcash inflows, and uses of cash are known ascash outflows. Cash inflowsare sources of cash;for example, payments from customers, capital acquisitions, etc. Cash outflowsare uses of cash; for example, payments to vendors, paying off bank loans, etc. The statement classifies cash inflows and outflows into three categories: Operating activitiesexplain cash generated through revenue and cash spent for expenses. Investing activitiesinclude 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.)