Another Way to Create Cash Flow Statements (A Simple Debit and Credit Approach)
If you are comfortable with debits and credits, the Cash Flow Statement can be prepared by creating T accounts for all Balance Sheet items and adjusting all changes to the cash account.5 This is done by creating a large T account for cash divided into three sections (Operations, Investing, and Financing) and smaller T accounts for everything else. Then, for each change (debit or credit) required to adjust each account (other than cash) from its opening to closing balance, a corresponding opposite change (credit or debit) is made into the large cash T account. Let us do this for our example above.
For each small T account below, the opening and closing ...