 In this presentation, we will continue on with the statement of cash flows, financing activities, taking a look at cash receipt from issuing stock. We're going to be using this information, the comparative balance sheet income statement and the additional information focusing here on the comparative balance sheet to make this worksheet. Support accounting instruction by clicking the link below, giving you a free month membership to all of the content on our website broken out by category further broken out by course. Each course then organized in a logical reasonable fashion making it much more easy to find what you need than can be done on a YouTube page. We also include added resources such as Excel practice problems, PDF files and more like QuickBooks backup files when applicable. So once again, click the link below for a free month membership to our website and all the content on it. We're taking these differences in order to construct our statement of cash flows. We had the cash flows from operations cash flows from investing activities. We're now working on the cash flows from financing activities. We found a home so far for all of these numbers except down here we're looking at the common stock and paid in capital. So those are going to be the numbers we here are focusing on common stock and paid in capital. Now those two we're probably looking at them and saying well they're probably not an operating activity. But if we go through our thought process we would say hmm what happened here? Well common stock went from 200,000 up to 215,000, paid in capital went from zero to 30,000. So they increased and why would that happen? Well it must be that we issued stock that would typically be what happened. So if this was a sole proprietorship or partnership then it could be this would be similar to like the investment the owners putting money into the partnership, putting more investment into the partnership. Well if that's the case then if we look at the journal entry for that we'd say well then we probably debited cash and we credited common stock and paid in capital. And note that there's nothing involving an income statement account no revenue or expense and therefore it's probably not going to be the operating activity. And then I would ask did we purchase anything? I was like no we didn't purchase anything. The owners purchased the stock, the owners purchased investment in the company, but the company didn't purchase any assets. So it's not it's not all that means it's going to be a financing activity so it's not investing it's going to be financing. The company got money from the owner, the owner is financing the company it's giving capital to the company. So it's going to be a financing activity that we're going to have here and we'll of course say that cash we see from issuing stocks can be the 45. Now the only confusing thing here is that of course we're going to group this is the one case where we're not finding a separate home for these two. Why is that? Because remember that when we issue the common stock we usually issue it at par value and then so we debit cash for for whatever we get and then we credit common stock for the par value to make it all even and then we credit paid in capital. So these two accounts are really kind of intimately linked and therefore the 30,000 and the 40,000 kind of go together and so we're going to increase this by the by the 45,000 so we'll put them together and we would think that we would be pretty good there that that full 45,000 is probably due to the issuance of stock. Now again we don't issue stock all the time if you think about the stock exchange where they're trading stock all the time that's because they're not it's not the initial it's not an initial offering that those aren't offerings from the company typically they're just buying and selling from other people other investors the money the investments to the company from the owners the issuance of stock doesn't hopefully it doesn't happen to all that much because that would mean that the that the owners keep on having to finance the company so it's going to be another area where there will will be few transactions if we want to check that number and see if there's anything else that happened there we can go into the common stock general ledger account and just see what's the activity and just see exactly what's happening in other words there's not going to be a whole lot of detail as there would say in the cash account for the GL in the common stock and paying capital so we can go in there and say okay what is this difference from and there shouldn't be too much going on for us to figure that out and most likely of course it will would be a sale that happened once we have this information we can sum this up so the 5000 to 225 the 45,000 adds up to the 72,500 so what we have now is is the cash flows from operating activities that we brought out to the outer column here summing up all of this bringing into the outer column cash flows from operating cash flows from investing only having this one item here so we bring that out to the outside and there'll be more items when we do the adjustments but then we have the cash flows from financing activities including these items bringing out to the outside and then if we are to add these up then we're going to say the the operating activities 51650 minus the 62250 plus the 725 it's going to be the 619 so that adds up to that 619 remember that's the one we kind of left alone we put it down here to see where we're going and now we're kind of verifying okay that's that looks right and then what we really want to do is get back to this number because this is this is kind of our end goal here but it only ties out to our worksheet and we want to make it really easy for the readers of the financial statements not to tie out they don't we don't want to make them do math to figure out the difference between these two periods as they could with the balance sheet we want to basically make it easy for and do the math for them so we're just going to say okay here's the cash at the beginning of the year which is the 615 so this plus this gives us to the cash at the end of the year hit this number here so this is really kind of the number we're looking for that's the change and then we're going to say okay let's get back to this number because that'll be really easy for them to tie out to the balance sheet number which will be that number here so this is going to be the full process now note now we have something that's in balance from doing this we can say okay this whole thing works however it's not right because the income statement as anybody will tell you if they watch you put this together the first thing they'll say is that number is wrong because it doesn't tie out the net income on the income statement and we know that this number it's going to need some adjustments and whatnot but what we do have is something that works it's in balance whereas we would not have that if we just start pulling numbers from the income statement that don't don't tie into our worksheet at all so what we want to do now is go okay now we've got something that works let's fix these systematically one by one in such a way that we remain in balance after each step kind of like we would if we were doing journal entries so we'll use the same kind of journal entry double entry accounting type of thought process to do adjustments here that will hopefully leave us in a position where we've remained to work remain to be where we know we're correct