So I'm the Agile Coach with the Red Hat Developer Group. And basically, this is the journey not only from the Agile Coach, but also from the point of view from product management, how we transition from the waterfall model into the Agile model and finally into the DevOps. So a little bit about Developer Group. So this group started about three years ago. And the main focus was for us to, we were very ops-friendly because of the rail and j-boss in the middle way that we used to serve up. But as we kind of started transitioning into the cloud, we realized that we also needed to bring developers to the front. So about three years ago, we started this journey. And we started building tools that would help the developers to become more productive at a much faster rate. So our group is about 250 developers. We have spread it about in 16 countries because Red Hat encourages remote work as well. So we really spread out. And it's a very distributed team. And we all try to work together to kind of come up with the tooling that will help the developers. And because the time zones, it's a little challenging. So we kind of do hack Agile a bit to make sure it works for us. In this example, one of the examples of the developer tool is the Che. I don't know how many of you have heard of Che. It's an online editor. It's basically a cloud-native editor that people could use. And you could use it in an open shell as well. So this is one of the examples I go with when I'm talking about our journey. So when we started this group, because previously Red Hat was used to three-year releases and maybe six-month releases in middleware, we had to transition from the waterfall model to Agile because we wanted to develop at a much faster rate, where we needed the feedback cycle to be much faster rate. So at first, everybody was curious as to how it would work out, because a lot of open source and Agile values are similar, but the working styles are very different. For example, if you talk to open source developers, they're not used to reporting status or a daily standards or updating their teams as to what they're doing. You could code at any time at 12 in the midnight, sitting in a bar, drinking a beer. But when it transition to Agile, you need to start working with the team on a regular basis. You need to start communicating on a daily basis. And that's where we got a few challenges as to, why do we need to change? Everything is working. But then we let them experiment with it. So one of the things that you'll find in our org is there's no single team which uses Agile or Scrum in a similar way. Some people use Kanban, some people use Scrum, some people use Scrumban. Some do weekly stand-ups, some do daily stand-ups. So we kind of experimented a lot. And slowly, we got adoption. So for our group, right, because it's a developer's group, we wanted to come up with ideas. And the best way for a red hat is always to go over to the community to find ideas. What do we work with? What is the community interested in? And as one of the things, for example, we found that people like Kubernetes, people like OpenShift, but the very steep learning curves. So we basically developed the opinionated CLI tools like Odo that will help them to cut down the steep learning curves and actually use with much investment of time and effort. We also experiment a lot. For example, if we do decide on a project, for example, analytics is one of the things that we do. And previously, we did a big bang approach and didn't work very well. So then we started introducing plugins into a VSCore editor and see how the developers were using it. And we found that was much more useful. So we do a lot of experiments. And from the investment's point of view, we do invest a lot of time in the community as well into meetups and even face-to-face meeting for our own developers, because we are spread out. So we try to see at least the team meets once a year, face-to-face. So they have their personal connections. So that's some of the things that we kind of did to develop culture. And here I'll talk about more. So previously, we had a separate SRE team and then a Dev team. But if you've been ever in wild water rafting, you would realize it's only one person who can actually direct the boat. And everybody needs to go in a similar way. So what we did is we actually changed the structures of the team, the org structure, so that the culture would follow. Because unless you change the structure, culture is very difficult to implement. So changing the structure helped us. And what we actually ended up doing is the SRE team attend each our meetings, calls, cabals, whatever we call them. So they know our need. But people do talk about why SRE team? Why can't DevOps be all in one? So one of the things we realized is it's very hard for a team to focus on everything. Something like storage, or security, or network, or the personal data. It's better that the developer focuses more on this stuff. And the SRE team makes us available whatever we need. And this will help us to not only develop, but also in running and managing of services. Because that's a big transition. Today, the teams not only develop, build, and deploy, but when there's a production issue, they're the first ones that will be called in. And that's what we do. And one of the things that really works for us, because we are so spread out in different time zones, we have almost like 24-7 support. Because someone is looking at it, then we basically use Matamos as a chat service where people develop a stock and kind of send in a pull request or a patch as soon as they say it. So that's one of the things that changed. And the SRE team, what they do is they make us all the logs and everything we're able to ask through a tool called Xabix. So we know one of the services is down whenever a memory is running out on a certain service and things like that. So the developers have actually shifted not only from developing and building and deploying, but also running and managing services. And we kind of start keep preaching about the thing that you kind of own the service and prod as well. So typically, when you develop a product, you have a roadmap. You have a release schedule, especially someone like Red Hat who works in the upstream. You are dependent on when the upstream releases. For example, OpenShift is dependent when Kubernetes releases the next one. So then how does this tool tie up, like going continuous delivery and actually depending on releases? So what we did is for us, when we talk about the trains and sprints and everything else, that is just for planning. But the delivery is always continuous. And the release schedule is basically become just a check mark as to when that will grow out. But we don't do a code freeze or anything like that to make sure that we kind of get the release date. We basically work continuously. And whenever we have a release, the code is ready to go out. The same thing with versioning and all that. So with OpenShift, it's one of the beautiful things is that we have a responsive infrastructure. Developers can choose where to develop and how much things that they need, resources they need. But one of the other things that we are trying to do on top of that is develop a tool chain so that they can actually plan, develop, build, deploy, all those things which can be on top of OpenShift, which is a value add. So that's what we are trying to do as a group to make it much more useful. So for example, the pipelines, where the teams can choose how they want to release the product, whether you want to go from dev to stage to prod, dev stage to live and then prod. So this is all configurable by the developer himself or herself. So this is what makes it very easy. And this is where the value addition from the dev tools group from Red Hat comes in. And like I mentioned before, we make everything available to the developers, the monitoring and alerts, the visibility into services, how they're running. We have a status page when the service is up and down. And we basically provide complete transparency not only to developers but to the outside world as well. Because we also run this as a SaaS service, the same product whatever we offer, we also run it as a SaaS service so people can try it out. And we have end-to-end tests running 24-7 so that we know when there's an issue that comes up. If something is merged and if something is breaking, then we would be alerted of that. And one of the things which keeps us continuous delivery going into production is this ability to turn toggle features on and off. So that we can put it in production, then the PMs or the product managers or some of our developers will take a review it. If everything looks good, we turn it on. Then we announce it to the world saying that it's on. You can start using this. So this is all I've been from the project manager or the agile coach point of view. Then let's come to the product management side of things, how we kind of evolved on that side. But that side also had to change a lot because they were also kind of used to long-release cycles and sign-off sheets and all that before going any product being released. So community is nothing new. I think we always did that, but I think one of the things we changed with coming into the cloud era is we kind of started the frequency of meeting a lot more. We kind of meet on a weekly basis with the community. We have a call. We also have a chat wherein we talk to people as to find out what their interests are. And in the community calls, what we do is we kind of highlight our partners or anyone who is a contributor, for example, Che, let's take Che. So we highlight companies that actually are using that product or are contributing to the product and they talk about what the needs are, why they're using Che and things like that. And so like many things else, we have open calls, we have conferences, we have meet-ups. And the biggest thing is because we have open repositories, people can actually open issues, put in comments, and kind of let us know what's working for them and what's not. And we're also trying to make it much easy for people to get involved wherein we have a getting started guide. We have kind of labels to picture as to is it a beginner-level issue or is it an intermediate-level issue so that someone who is just starting out can still be with us and we kind of mentor them the process of making their first contribution. And the conversation feedbacks look like, whenever we come to a conference like this, one of the good things is, other than the presentations, you also get to hang out and also at the coffee table, right? The coffee conversation, the water table, whatever you want to call them. That's where we kind of get to really know what the challenges are and what are the features someone is looking for and what is the problem they're trying to solve. So the water cooler conversations is something that we kind of try to facilitate a lot, especially with customers and partners. And we do have several events that help us. And like for example, DevConf is one of the things we have in US, Europe, and even in India now. So these are the conferences wherein developers can get together to find out what their needs are, find out what are the challenges and what actually motivates them, what are they're passionate about. And we kind of try to see how we can get that feedback back to our teams. So one unique thing about Red Hat is we not only send our product managers, but we also send a lot of our developers into these conferences. So they get first-hand information from the customers and partners as to what the needs are. And the other thing that we did share is implement telemetry. Because when as a product manager or as a developer, we kind of develop these use cases saying that, okay, this is the use case, this is how the user will use it, and this is why he'll find it useful. But a lot of times users kind of use the product in a very different way. And since we don't have that luxury of speaking to each and every one of them, this kind of gives us an idea as to how they're using it and when they're using it. For example, they might not use the online editor all the time, but let's say they're on vacation and they get a proud issue. They get a ping or a page. And then instead of actually, if they don't have a machine there with them, they can just wire up their browser, log into Che, go to their GitHub and actually go to the bug and actually go solve it. So that's one of the use cases. And the other one is they might use it, decide to get a few contractors to speed up the project. And they're setting up a laptop or again their IDs and everything which might take three weeks. Something like this, they can be up and running in the next few hours as soon as they tell them what the project is. So this actually is very useful for us to get to know how our products are being used. And of course, we have this planning meetings and we also have wherein we kind of sit together in a face-to-face and basically bring all our observations and we kind of reflect on what people are talking about, what they're saying about a product, what a competition is and responding to that in a matter, in a timely manner, so that we are ahead of the game or at least in the game. And so before making big changes, we kind of again do small experiments to see how folks receive us. And then we go and kind of go back and ask our teams to work on certain things. So one of the things we also realize is when we are building this huge product which is from end to end, which can start from planning to building to deploying and everything, we realize it's a very opinionated way of doing things. And a lot of times people might not use it because they might be using Jira for planning or they might be using Rational or they might be using their own editors, they might not use it, but they might want to use some parts of it. So that's when we realize we need to make our products extensible and pluggable so that instead of building one big monolith we kind of build services and kind of stitch together so that the customers can choose which ones that are interested in taking it up. So that was one of the big things that we kind of realized maybe about one year into the game that we need to make our architecture very extensible. So like I said, experiments, right? For example, we do analytics, we kind of do stack analysis, wherein we kind of ingest a lot of data and we kind of let people and developers know what are the CVs in the stacks they chose, what are the dependencies, what are the licensing issues. So instead of coming to us in our big monolith product, we also what we did is we also made it available as a service and we had made a plugin for VS Code wherein they could actually plug in and use it and actually find out what actually use our service and then find out how their stacks were doing and if they had what dependencies they had and if they could what any alternative we could also suggest we would also suggest alternatives and things like that. So this we thought was a good way of gauging kind of interest in the market and making it available as a service to different platforms and the IDs where we could actually generate more intelligent data and much faster pace then actually kind of coming up with a big product which does end to end. So this was one of the... This is one of the current approaches that we like and we keep continuing this approach so we basically give a taste of what we can do and from then if there's enough downloads and enough updates and enough engagement with the teams then we basically kind of go and keep investing on that service, developing it. For example, we first did Java, then we are trying to do Python now and then we'll do Go lang. So depending on the number in the community, the interest, that helps us to gauge what people are interested in. So then basically, like I said, because we have open repos, usually what happens is it starts out as an issue, report it on GitHub and we start engaging them and following up with them as to what their needs are and what the disk is brainstorming. So you can see the product management of cycle of things also is very different when we move into the cloud side of things rather than the huge release cycles we used to have. So the PMs have also kind of adopted different methods and ways to reach out to people apart from the traditional ways. And finally, if we are able to engage them enough and if they're interested enough, it kind of ends up a pull request and we basically guide them through how to merge it and become a maintainer as also if they're regularly getting us updates. So that's our journey till now and the journey continues. We keep going from a two-day warp steam for wherein we have a couple of mergers every day and we're kind of trying to continue it and also increase the speed of the feedback cycle as well. That's been the journey so far and the journey continues. So that's all I had. So you lost, here we go. Where were all these speakers who finished early yesterday? It's a major undertaking. Aha, right. Questions? Okay, lots. I think you were just first. We have plenty of time, so that's okay. It's very soft. Yeah, hi. So basically, as you said, the journey, basically. So being a developer and an employee in one of such organizations, so in Agile, what matters the most or what matters amongst the most is the scrum call. So basically, as a part of the scrum, what changes are exactly you're making or exactly what changes are you proposing so that it will be easier for you to kind of adapt a different journey than what exactly you're doing so. Yeah, so basically we leave it to the developers, the team as to what to choose and I guess it again has to do with a lot of experimentation. Because we have spread out in so many different countries, they'd say a team has people from four different countries and it's not easy for them to get on a call, daily scrum call, right? So what we did is we allowed them to experiment, they tried that, they tried a weekly call and they also tried kind of what we call asynchronous updates using Slack or most whatever that you use and the team found their comfort as to what was effective for them. So instead of we kind of trying to focus on what would work best, we let them experiment and we kind of follow through the journey and one other thing that we do also is we cross-pollinate wins. Like if a team has kind of achieved success through like asynchronous updates, we say, hey, this team is doing good and it looks like they're fine with it. Do you want to try that as well? I think you're next. Hi. So you mentioned about making some changes to the structure but you gave the example of SRE joining your daily huddles. It's more of a workflow change. Is there anything more substantial change on the org level or that's not necessary? So the org level, so I feel it's easier to work in spite of the org levels. So what we did is we, even though reporting levels and everything might be different, for example, we have different reporting structure for UX team, QE team. But when it comes to the scrum team, we bring them all together regardless of how they're reporting or managing. And the other thing that we do is, because we have fast delivery cycles, one of the biggest experiments we did is like the performance side of things because that again is at the org level. We changed that as well wherein the team lead gets to evaluate the team every two sprints so that you're not waiting for an annual review and an annual raise, but a quarterly raise based on the three or four sprints that have already been done. So that was a big change where we actually get real-time performance of the team members and they actually seek that reflected in their bonuses every quarter. So those are the kind of experiments and things that I'm talking about. Anybody else? All right. Well, thank you very much.


Hi everyone, Joe for Jaspy's casewrakes.com coming at you with a massive random number of block randomizer half the major league Is in this number block 15 teams and this unlocks tribute pick your team number one coming up in a separate video the next video So there are gonna be some non numbered some non numbered Base cards so we're gonna randomize those as one lot and we'll be randomize it to one person in this break If there are non numbered hits, which I don't think there are too many of those we'll we'll separate those out We'll cross that bridge when we get there in the next video big thanks to this group here It's got a little rooftop next to your name That means you won those spots in the filler the one only filler we have to do thanks to these two Forgetting your spots straight up. There are the numbers right here. Let's roll it. Let's randomize names and numbers four and a six ten times one two three four five six seven eight Nine and tenth and final time Got ariano down to Jeff four and a six ten times for the numbers one two three four five six seven eight Nine and tenth and final time after ten we got three down to eight So here's how it shakes out ariano with three Chad with zero so you get any and all redemptions for 15 teams Chris with six Jeff with seven Sean with D. So Sean D. You have number one Now redemptions even if it's a one-of-one redemption will still go to Chad But any live one-of-ones will still go to you Martin with four Adam and nine Stephen with two Oliver with five and Jeff with eight So let's sort by column a or column B. That is numerically And coming up in the next video will be the break itself to ask these case breaks calm. Bye. Bye


Hey, good morning. Welcome to Morning Prayer where we are prepared and ready to start on time from the Radiant City Center. I want to invite you to stand to your feet if you're in the room. Grab your Bibles, journals. I want to start reading Isaiah 56 verse 7. It's a passage, Pastor Lee led this weekend and I just want to declare this. We're going to be praying just for the church, just to grow and worship and prayer, being a praying and worshiping church. Isaiah 56 verse 7 says, Even them I will bring to my holy mountain and make them joyful in my house of prayer. Their burnt offerings and their sacrifices will be accepted on my altar. For my house shall be called the house of prayer for all nations. The Lord God who gathers the outcasts of Israel says, Yet I will gather to him others beside those who are gathered to him. Let's go before the Lord. Lord, we love this promise. Even the sons of the foreigner, as it says the verse before, that's us, the Gentiles who've been grafted in. Lord, we have been brought into your house of prayer. And we have joy and gladness to serve in your house this morning. Jesus, we just approach you this morning with gratitude, enjoying our hearts to be in your house. Lord, we want to bless your name, bless you in this house and in this sanctuary. Let's just begin to bless his name, begin to bless the sanctuary. Gathered here to declare together there is no one like you. No other name we would rather gather around. There's no other tower that we're going to run into. There's no one else who gave their body and blood for us that has healed us, redeemed us and restored us. Jesus, who is like you? Who is like the Lord? Moving to time of intercession. I want to keep praying Isaiah 56, 6-8. This passage we read this weekend. Just praying for the church just in western Michigan. Asking that the Lord would raise up his house of prayer. Just even thinking of the sin that came and invested in us a month ago.  Isaiah 56, 6-8 says, Also the sons of the foreigner who join themselves to the Lord to serve him. And to love the name of the Lord, to be his servants. Everyone who keeps from defiling the Sabbath and holds fast to my covenant. Even them I will bring to my holy mountain. I'll make them joyful in my house of prayer. The burnt offerings and their sacrifices will be accepted on my altar. From my house shall we call the house of prayer for all nations. Oh Lord God, who gathers the outcasts of Israel. Says I will gather to him others beside those who are gathered to him. Bring forth this promise. This glorious promise Lord where you even thought of us, the Gentiles. Those in Kalamazoo, Michigan even in this land of Israel thousands of years ago Lord. You had us in mind in this promise Lord. You were picturing this prayer room Lord.  You made this promise of making us joyful in your house of prayer. So Lord we bring this holy scripture Jesus that you yourself when you stepped into your father's house. You reordered what was happening and brought the definition that my house shall be called a house of prayer. So Lord we lift up the church in this nation God. In this hour that we live in, it's much tension and pressure. Lord where there's threats of the spear of the age, prayerlessness in your church. God we just ask that you would make your house the house of prayer. That people of intimacy with you and people of intercession Lord would be the defining characteristic of your church. Lord we would not be known for our political affiliations Lord. That we would not be primarily known for the things that we are against Lord. But what we would be known for is a people of deep love for Jesus and of prayer. People who are deeply committed to relationship with Jesus and prayer. God we ask for the rebuilding of the corporate altars of prayer. Lord I think of the great awakenings. Lord I think of the great noon prayer revival that happened at the great awakening Lord. All over cities where churches of different denominations Lord. In Kalamazoo all five of the denominations that were downtown came together and began praying. We saw God's power and presence break out and hundreds were saved in that revival. God you did it in the great awakenings Lord. You've done it in remnants throughout history. Lord with the Moravian Lord and the Welsh Revival Lord. Prayer mountain with young Echo Lord. In all of these instances where you gathered your church together to pray and intercede. Lord we ask that you would rebuild the fallen ruins. Lord that you would re-gather the living stones of God upon the corporate altar.  Lord we ask that you would raise up a praying people among this church Lord. Start with us here at radiant. Start with us with the church in Kalamazoo. Start with us with the church in western Michigan Lord. We ask that you would raise up your house of prayer. Lord we ask for joy in your house. Lord we are in need of the joy of the Lord that is our very strength. Lord we look around in a world that is heavy, that is angry, that is dark, that is fearful and confused. Lord we need a holy church. A church that is other than and separate to the world. Lord in what is other than more in this hour than being filled with the joy of the Lord. Lord you said you would make us joyful in your house and that the joy of the Lord would be our strength. So Lord we just ask Lord in this prayer room. Lord in the prayer rooms all over western Michigan Lord in the prayer meetings and services. Lord that you would release joy. Lord the not temporal happiness that comes from circumstances. But the joy of knowing you. The joy of loving you. The joy of being in relationship with you. Lord the joy of encounter. Of feeling your presence. Of being able to say I love you. And to hear you say I love you back. To be filled with love in our hearts Lord. This is the joy we're longing to be marked with Lord. Lord that they would know that we are Christians by our love. That we would stand out because of our joy. That even when we're shaken in personal circumstances of difficulty. Lord that there would be joy that overflows out of us. Because it doesn't come from this world and it doesn't come from circumstance. It doesn't come from money. It doesn't come from fame. But it comes from your presence at your right hand oh God. A pleasure is forever more. And your presence is fullness of joy. Lord we believe this promise from Psalm 16. Lord we ask that your house is Lord. Your church. In this region Lord would be known for the joy of the Lord. Lord make us joyful in your house. A sing for joy is asked for an exchange. Our robes Lord. Our best efforts. Our strength. Our sorrow Lord. Our sinfulness. When we bring it we lay it at your feet. We ask that you would clothe us in white. We ask that you would clothe us. Rob us in the righteousness of Christ. Or we long to wear the robes that Jesus wears. Or the robes of the high priest. Or the kingly in the priestly ministry. Or the robes of righteousness. Or let your church in your righteousness in this hour. Or we ask that you would stir up intercessors Lord. Watchmen on the wall who will pray and contend and intercede in this hour. We would raise up those who would not rest. Or we ask that you would raise up night and day. Morning, noon and night prayer and intercession in this region. Or we thank you for how you're releasing that of different churches even in our city Lord. I thank you for what you're doing at center point and how they're stepping out in faith and walking in new prayer meetings and expressions Lord. I thank you for what you're doing at stones Lord and these nights of worship and encounter and prayer Lord. We thank you for the embers in this city of prayer that are burning bright Lord. We ask that you would breathe on those embers. Or we remind you of what happened in this city Lord in the great awakening. Unity among the church. Because there is prayer in the hearts of your people. When we know prayer is able to break down walls of division Lord. When we pray together there is a unity with one mind and one mouth. And so Lord we ask for a radical unity in this city Lord. In this region of western Michigan. Lord where the church would come together. Lord that the Joel 2 solemn assembly the gathering of your people Lord that it would not be a specific church or congregation but it would be the church of Kalamazoo. It would be the church of western Michigan. So Lord we just ask that you would release unity and prayer in this city in the name of Jesus. That you would do it again. God we ask for divisions to come down Lord. Lord where there has been racial division. Lord we ask that you would bring healing and restoration in the name of Jesus. Lord that there would be unity. Lord where there has been division over ideology Lord. There has just been division and territorial disputes Lord. We just ask that your blood would come and cover your church and your bride. But we thank you just for some of the expressions of unity that have been happening Lord. We just ask Lord just greater levels of unity and healing and wholeness for your church in Kalamazoo. Lord that as this world gets more segregated Lord where we are separating due to ideologies and political parties Lord and races. Lord we ask that you would break down those walls. Break down those walls of division in your church. Lord we ask for a unified multi-ethnic Lord. Multicultural Lord. Even just the different gifts and the body and the way that the different churches are meant to operate in the city Lord. That you would raise up a unified church. Lord redig those walls Lord. That we would pray together. That we would love each other. Or that we would not have a competitive spirit toward one another. But we would cheer one another on Lord. We would celebrate the grace of God in this world church while recognizing what you're doing in the broader body. Lord we ask redig those walls of unity and prayer and revival that once we're dug in this city Lord we know that they're dormant but they're lying under the surface and we're just asking that you would redig those walls Lord of revival and unity and prayer in the name of Jesus. But we receive that prophetic song out of the mouth of the prophetic singers Lord that there is a wellspring coming us just even as we leave this place of prayer Lord just for faith and hope and joy in our hearts. That you are on the move that you are not absent that there is a wellspring of life coming to this city that we're going to see. There's the fruit and result of our prayers we love you and we bless your name from this house in Jesus' name. Joining with us as we pray and intercede and worship and bless the Father we're going to be back here at noon today at 6.30 for prayer and we'll be back tomorrow morning with a broadcast as well. Have a great day.


Hello, in this lecture, we're going to talk about creating a statement of cash flows using the indirect method. We will be able to define a statement of cash flows, create a statement of cash flows, explain a process of creating a statement of cash flows designed to limit mistakes and define the indirect method. So what we'll do is we'll work through basically a problem and look through the statement of cash flows. We want to think about a few things. We want to think about how to create a statement of cash flows. We want to think about a few definitions of what is a statement of cash flows. We want to kind of explain what the purpose is of a statement of cash flows and going through the process can help us to do that. Also want to point out that creating a statement of cash flows can help us with setting up a problem in such a way that we can limit the amount of mistakes that we will make. So a statement of cash flows is something that in a lot of firms, people generally often have problems to create the statement of cash flows and it's good practice to go in there and create the statement of cash flows and try to create a system in which it's easy for us to have checkpoints and see where a problem is going to happen. So that's also something that we will work through with a statement of cash flows because at the end of the process, just like if we were creating a balance sheet, it's easy for us to get to the end and it's not in balance, it's not working and not have any checkpoints to go back and try to figure out, well, where is it off? Why is it off? And then you start the entire thing over. So creating a process in which you can have checkpoints and go back and try to figure out where it went off is good, not just for accounting, but for any any type of process. If you're trying to figure something out, you want to see, OK, where can we find defined points in which we know that we're correct here? We know we're correct there. Then we can move forward in a systematic way. Also want to point out that a statement of cash flows is really good for learning accrual concepts. So you can get a lot of the statement of cash flow questions, right? If you just memorize the types of areas within the statement of cash flows. But if you're actually going to work a long problem like this or work a statement of cash flows and create one from scratch, if you can do that, explain that you really are getting the concepts of an accrual concept and cash concepts, because what we're doing is we're converting from an accrual concept to an accrual concept and when we do it in an indirect method, we're doing that indirectly, which is kind of conceptually difficult. So if you're able to do the steps, then that's really good. If you're able to do the steps and explain those steps, then you have a really good understanding and that's good practice to understand the accrual concept, what the accrual concepts are and how they compare to a cash concept. So the way a statement of cash flows will be created generally is that we'll take a look at the financial statements and then we'll put a worksheet together, the worksheet being over here and then we'll take that worksheet and we'll create the statement of cash flows from it. So that's going to be our strategy. That'll be our process. Notice that first of all, the statement of cash flows is a beginning and end. It has a beginning and an end, just like the income statement. It's over time because we're majoring cash flows over time. The funny thing about a statement of cash flows is we will do that using basically balance sheet accounts and that the reason that's fun is because the balance sheet accounts are going to be as of a point in time. So the balance sheet accounts are as of a point in time. We're using that to create something that is, has a beginning and an end, such as the income statement. So the reason we'll do that is because we have a balance sheet. We'll be using the beginning point in time, which is the same as the end of the prior period. In this case, the end of the last year, 20x4, and we will take the current balance sheet amounts. So we have a comparative balance sheet here as of 20x5 in this case. And we will then look at the difference. The difference will be the change. So obviously, if we're looking at the end period here for cash, 123, 450, compared to the beginning of cash, 61, 550, then the difference in that in essence is the change. So that's the whole story. That's like the big picture story of what happened to cash. Well, that's the change in cash. Of course, cash went up and down and whatnot. That's more detail in the story. But in essence, we have that change in cash. That's going to be our, you know, towards the end of the cash flow statement. That's the end of our story. We're going to kind of back into what happened. Why do we have this change in cash? First thing we're going to do to do that is basically convert the already converted balance sheet back in to kind of like a trial balance. And this is really good practice to do because we have practice going from a trial balance to creating the financial statements. So going from a debit and credit trial balance to creating the financial statements. It's good practice to go back the other way, because now we're going to take basically the plus and minus financial statements, plug them back into a debit and credit format so that we can use that worksheet to then create the financial statements. So this would be the first step. I'm going to remove the subtotals. We're going to take the plus and minus format convert it back in debits and credits. So for example, for 2015, we're just taking this number here. That's where the cash is gone. We're going to take the account. See, well, it's going to go back here. We're going to take the inventory. It's going to go here. We're going to take the prepaid expenses. Those are the assets going to go here. We eliminate the total. We're not going to total up here. However, that's a good checkpoint. We can add these up. And if those add up to this total, we're doing good so far. And then we're going to keep on moving on to the next account. Equipment is going to go here, accumulated depreciation. Notice there's no negative here, but it says less. So that's a plus and minus statement. We need to convert that to a debit and credit. We will then I'm going to represent the credits with brackets here. So I'm going to put bracketed one, 10, 750. Now, a lot of people will not do that because that's a common error to mess things up before doing things quickly. If we check, do our check figure here, we would say, well, it's this minus this should equal this check number. So we'll be able to check that. Or we can say this plus this, plus this, plus this, minus this, which we can highlight if it was in Excel. Should equal our total assets. And if we do that, we're doing good so far. And then we would keep on moving on accounts, payable accounts, payable credit. So it's a positive number here. We're represented represented as a credit on our worksheet. And then we've got the short term that's here credit. We would add the two credits up adds up to our subtotal. We will not include the subtotal, but that's a good check figure. Then we've got the long term. Here's the long term credit we have the common stock. So common stock is going to be a credit. We have the retained earnings. It's going to be paid in capital, a credit. And then we have the retained earnings, which will be a credit. And once again, we can check and see if this is in balance by saying the debits minus the credits should then equal zero. So the debits are positive number, credits are negative number. That's how we'll represent this in a shortened worksheet, limiting the amount of columns we will need in order to make the worksheet. And of course, we'll do the same thing for the 2000 X four. Pulling these numbers in in the same fashion. And if we do that, then the debits and credit for 2000 X four will add up to zero. If the debits and credit for 2000 X five add up to zero and the debits and the credits for 2000 X four add up to zero. We'll then take the change for all those amounts. So 2000 X five is one twenty three four fifty minus 2000 X four sixty one five fifty means there's a change. There's a difference of sixty one nine. We'll do that all the way down. We'll take the change all the way down between these amounts. And if this adds up to zero and this adds up to zero and then we took the change of all those, then that must add up to zero. And that's what we'll be working with. So now we're going to be working with this. This are the numbers that we will work with in order to create our statement of cash flow. Now, once we have this, what we're going to do is we're going to take these numbers and we're going to find a home for these numbers. We have a basic statement of cash flows on the right hand side, just an outline of it. The major piece of the outline you want to take a look at is we have the cash flows from operations, the cash flows from investing, cash flows from financing. Those are the three factors of the statement of cash flows. You want to memorize those and our question then is if we just go through all of these accounts, we need to find a home in one of those three sections and plug them in there. As long as we do that, then as long as we find a home for everything, the total will basically add up to zero, obviously, because if we found a home for all these and we have them going the same way, the same sign, whether it be plus or minus over here, then it has to add up to zero. So what we're going to do is we're going to find a home for everything except cash. Why? Because cash is our ending number. So we're going to find a home for all this stuff. The cash balance is going to be down here, the increase in cash. So if we find a home for everything except cash here and we subtotal all that up and add that up, then it'll add up to the change in cash, which is what we're looking for when we're talking about the flow of cash. So we're going to talk about what the cash flow is in terms of the cash flow from operations, the cash flow from investing, the cash flow from financing. We're going to go in systematically one by one in everything, every change in every account on the balance sheet except cash. And then if we add those up, we will then come to the change in cash. That of course is our check figure. If that if that doesn't happen, that's like us not being in balance and we have a problem and we're going to set up a system so that we reduce the number of problems that we have as we go through. The first thing we're going to start off with is a the net income. Now this has to do with the difference. I want to talk briefly about the difference between the direct method and the indirect method. So the cash flows from operation is basically just taking the income statement and converting it from an accrual basis to a cash basis. If we thought about that, the most logical thing, if I was going to ask someone, could you convert the income statement from a accrual basis to a cash basis? What they would probably do is say, well, yeah, we would then try to figure out what income is or revenue is on a cash basis. I would convert revenue to receipts from customers. And all the expenses, we would convert expenses from an accrual basis to a cash basis and say all expenses are cash paid for expenses. So then we would say, you know, cash received from customers minus expenses that were actually paid with cash gives us the net income on a cash basis. So that would be the direct method in essence that we would do. We're going to use the indirect method for a couple reasons. The main reason is because oftentimes generally accepted accounting principles and other regulations require it, even if we use the direct method. So therefore, a lot of companies will use it. And because of that, most likely, the indirect method is widely used. So it's going to be used far more probably because of that. Second reason is that we already figured out net income. I mean, we figured out net income. It might be a lot of work. It could be more work. We would think to basically recreate the entire income statement on a cash basis. It might be easier for us to say, hey, let's take what we have now and we already figured out what net income is and like back out whatever we need to back out in order for us to get to net income on a cash basis. That's basically what we're doing. So I'm not the direct method is good. I've worked in firms that use the direct method. I think it's easy for us to explain the direct method to clients, but the indirect method is far more used widely. And if you can understand the indirect method, again, that really gives you an understanding of the relationship between the accrual and cash basis because we're kind of backing in indirectly to these changes. So it's good to think through. So the first thing we'll start with is net income. And the first question is, well, net incomes on the income statement, and we're talking about changes in balance sheet accounts. Let's go to the income statement to find what net income is. And I'm going to try to find a home for all of these first. Remember our goal is to find a home for all these changes. And so I would like to find what net income is as it relates to a change in a balance sheet account. So what is net income? We can think about this as basically these, these trial balances are basically post closing, meaning there's no income statement here. This is just the balance sheet. So the income statement has closed out to the balance sheet. Where does the income statement close out to in a corporation closes out to retained earnings? Therefore that retained earnings amount here, this increase from 125 five to 230 must be partially in due to retained earnings. I mean net income, mainly due to net income. So that change in retained earnings is probably net income. So I'm going to note that in this worksheet, I'm always going to flip the sign. So that's just going to be a conformity of this worksheet. So whatever the sign is here, this is a negative indicated by the brackets. We're going to flip the sign over here. So we're going to start with net income, which is a positive 104 500. So what happened here is that retained earnings went from 125 five and a credit up to three 230 credit. So we have this 104 change. We're going to assume 104 five change. We're going to assume that that is net income. Now, if I go to the income statement, which I'm not going to do now, if I go to the income statement, I may have a number that's different than the 104 five. It might be a different number. So I'm going to recognize that and highlight that and say, you know what, I'm going to look at the income statement later and there might be something else in retained earnings. It'll be easy for me to figure that out. I can go to I can go to the general ledger and see if there's anything other than net income posted to the general ledger. There's only going to be a few things posted to the general ledger for the retained earnings, but I don't want to start parsing out this number now. So you might ask what else could be in there, dividends could be in there. So if we pay dividends, it might be affecting retained earnings. But again, I don't want to start making breaking these numbers up into multiple different numbers. I want to first find a home for these numbers, then recognize the breakout of those numbers in a systematic way. So recognize that that might not be net income. That's OK. I know it's part of net income going to go back to it. We will fix it at a later time in an efficient way. So then we're just going to go down the list. So we're going to skip cash because the ending thing is going to be cash that's going to be down here. And we're going to go to accounts receivable. So accounts receivable went from a debit of eighty thousand seven fifty up. I mean, down to seventy seven one hundred. So first question, is that going to be in a cash flow from operating, investing or financing? One way to think about it is we can think that what's going to be the other side of a journal entry that basically increases accounts receivable. Why does the accounts receivable go up when we make a sale on account? We debit accounts receivable and we credit income revenue. That means the other account is a revenue account, which is an income statement account. And that's one way you can kind of think of that. Well, that means it must be operating because the operating activity has to do with us changing the income statement from an accrual basis to a cash basis. So we're backing into the income portion by looking at the change in the balance sheet accounts and the change in the income statement account related to accounts receivable is income revenue, which is an income statement account. Therefore, it must be going in the cash flow from operations. Also note that if we look at the cash flow from operations, we've got two sections here and one section is generally called changes in current assets and current liabilities. So basically all changes in current assets and current liabilities, including accounts receivable, would be in this section within the operating section. Now then there's the question of does it increase or decrease the net income from from operations in this case? If we're thinking about a cash basis. Now, there's a couple of ways to do that in terms of a cheat sheet. One is that in terms of this worksheet, we're just going to flip the sign on everything. So that's a negative. I'm going to flip the sign and make it a positive. You don't even have to think about it because that's the way the worksheet works. Other way you could think about it in terms of just having a cheat sheet being brackets mean that we're going to decrease it if it's an increase. So that seems kind of funny. But if it went up increase then it's going to be a decrease brackets in this worksheet. And if it's a decrease, meaning it is here went from 80,750 down 771, then it doesn't have brackets means not a negative. It's going to be an increase here. So you want to have a cheat sheet in mind, but then you do want to think through it. If you're doing a test or something or you're actually making a cash flow statement, you do not want to think through every time why the accounts receivable decreasing is an increase here. You just want to, you know, memorize the rule, but it is good to think through it a few times. So we'll think through it one time for accounts receivable, then we'll apply the rule. So all assets will be the same. We'll go by this rule and liabilities will be the opposite. So I'm going to think through this one time and then we'll think the same logic applies out square where you can think through it later. If you so what we want to do is think about what happens when we have an increase in account receivable. What happens? What's the journal history when we have a decrease in accounts receivable? So when we have an increase in accounts receivable, what happens? We made a sale on account. Therefore, people owe us more money and the receivable to go up with a debit and revenue goes up with a credit. On the other hand, when we decrease accounts receivable, what happens is we receive cash and we reduce the receivable account. So if we think about that in terms of the general ledger, we're going to debit accounts receivable here on this transaction, accredited accounts receivable here. So when accounts receivable goes up, what's happening to the income statement is that we're increasing net income. Net income is going up because the income went up. Income is net income is income minus expenses, but no cash was received at that time. So under a cash basis, we're increasing the net income when we shouldn't be because on an accrual basis, we should because that's when we earn the money on the cash basis. We shouldn't because we haven't got any cash. Therefore, if over the long term over the entire year, this journal entry happened more than this journal entry, then that means we recorded more sales in which we have not yet received cash, then we receive cash. Therefore, we need to decrease net income if we're converting from an accrual basis to a cash basis. If on the other hand, this entry happened more more than this entry, that means that over time, the receivable would have gone down. And when it goes down, that means we got cash, we reduced receivable, we got cash and we're not recording revenue in this time period in which we got the cash because under an accrual basis, we recorded last time period, you know, when we earned the revenue. So at this point in time, under a cash basis, we got to say, well, we should be increasing the net income under a cash basis if accounts receivable goes down because this is happening here and we got cash. So we have to record the revenue at the point in time when we got cash. So that's the reasoning behind it. But again, you just kind of want to learn the rule here in the rule will be either in the worksheet that you make or you want to have kind of like a cheat sheet like this. All right. So then we're just going to go down the list. We got inventory next. So inventory is an asset. It's going to follow the same rule as the receivable. We know the other side of inventory oftentimes is we're going to sell the inventory. Therefore, we're going to reduce the inventory. The other side is an expense cost of goods sold cost of goods sold as part of the income statement. Therefore, the inventory is going to go into the operating cash flows from operating and note that we can kind of see a cheat sheet on that. And we know that the changes in current asset liabilities go in the operating section. So that means that this is going to go into the operating section. It went in 2014 from two fifty seven down to two forty six. Therefore, we're going to follow our rule and we're going to increase the statement of cash flows in the operating section by that change ten one hundred. And again, this worksheet, we're just going to flip the sign. That's a negative here. It's a positive here. You can also see the cheat sheet here and increase is going to be a negative a decrease is going to be positive if we're talking about assets. So as of now, the operating section, we started with net income. Then we're going to increase net income by this increase it by that. That's what's going to go here so far. Let's keep going. And then we got the prepaid expenses. Same thing. It's an asset. And it's going to follow the same rules. It's a current asset. If we think about the other side of prepaid expenses, it's going to be the most common. It's like insurance prepaid insurance. So the other side of prepaid insurance is insurance expense, which is an income statement accounts. Therefore, it's part of the operating activities. It's also a current asset and therefore it goes into this section of the operating activities. It's going to follow the same rules as all assets in this section over the operating activities in that, in this case, it's going from 17 down to 15 one. That means it's going to be added back for similar logic as the accounts receivable account. And also in this worksheet, we know that all negatives is going to be positive. We're just going to flip the sign on everything. So at this point in time, we've got the 104 five in the operating plus this plus this plus this. That's what's going to go here at this point in time. Let's move to the next account. Next account is equipment. Notice equipment is not a current asset or liability. So we got to think through this more deeply now. Is it going to be operating? Is it going to be investing? Is it going to be financing? And in this case, if we think about equipment when we buy equipment, what's what's the effect on equipment on the journal entry? Well, if we bought equipment, then we're going to debit equipment and we're going to credit. Cash or some kind of loan, whatever we bought it for, neither of those accounts, no matter what they are, is not an income statement account. And therefore, since the operating activity has to do with the income statement, it's not going to be an operating. So then we have investing or financing left over. And it's actually in investing and this used to confuse me when it wasn't investing, because when I used to think of investing, I used to think of that's like stocks and bonds and equipment's not investing. It's an asset. But but when we think about it, obviously when we buy equipment, we're putting money into equipment so that we can use it in order to help our purpose, which is to generate revenue in the future. So we are in that sense investing in the equipment to help us generate revenue in the future. Therefore, it is an investment. We can see that it went from 200 in 2000 X4 to up to 110 750. So we're just going to make an assumption for now. I mean, again, I could go look at the G.L. and see exactly what happened. There's not going to be a lot of activity in an equipment account generally, because we don't make too many purchases of equipment over the years. We look at the T account. But I'm just going to assume overall that we bought equipment and we're going to assume so we're going to say it's going to be cash paid for the purchase of equipment. And notice what I'm assuming is we pay cash for it. And very well may not be true because, you know, if I bought a lot of equipment, we might have financed it and very likely that we did. But again, I don't want to start parsing off this number until because it could get very complicated when we start looking at different pieces of equipment we purchase and how we financed it, this number could get split up in very complicated ways. And that and before I do that, I want to find a home for all the whole numbers and then goes to go back and start parsing them up. So I'm going to make it yellow. I'm going to say, yeah, I recognize that it's very likely that I did not pay cash for that equipment. But I'm going to, you know, think about that at a later time. So we're going to move on to the accumulated depreciation. So once again, not a current liability or asset. Therefore, it's not necessarily in the operating activity. We're going to have to think about it a little bit deeper. And we're going to say, well, what's the journal entry that would be affecting accumulated depreciation? And that's the one where we we're going to depreciate the equipment. In this case, we're going to debit depreciation expense, credit accumulated depreciation. Therefore, this increase here, the other side of it is an expense. It's depreciation expense. So that that's an income statement account. So it is going to be in the operating activity, even though it's not part of the current assets and current liabilities, because the other side of it is depreciation. So rather than us calling it, this is going to be the change in accumulated depreciation. We're going to recognize what the income side of that is, what the income side of that change is in this case, which is just depreciation. We're going to put it up here in this subsection, which says income statement item, not infecting cash. What does that mean? What it means that within this net income of 104.5, there is depreciation, which had nothing to do with cash because we debited depreciation expense and credited accumulated depreciation, which has nothing to do with cash at that point in time, at that point in time, no cash was affected. At that point in time, depreciation expense decreased net income and on a cash basis, it shouldn't have. Therefore, that 104.5 under a cash basis needs to go back up by the depreciation 15.750 because we put it down according to the cruel basis and under a cash basis, it shouldn't have gone down. So it's got to go back up. So now we've got under the operating, we've got the 104.5 plus the 15 plus this plus this plus this. That's what this is going to be so far. So let's go to the next one. Next one, we've got accounts payable liability. Now, once again, it's a current liability. So we kind of know it's going to go in the operating section right here because it's in that subsection. If we think about when does when what's the journal entry for accounts payable? Well, we could think, well, we bought something like an expense maybe on accounts. We would debit some kind of expense credit accounts payable and therefore the expense is an income statement account and the income statement account has to do with the operating activities and therefore it should go in the operating activities. And you might be saying, well, what if we bought like inventory, which is an asset, we debit inventory and we credit the payable and that's true. But you know, even inventory ultimately is going to be expense and cost and good sold. So in any case, it's the easiest way to think about it is that we bought an expense and debit accounts payable. And if you think about it that way and you want to think about liabilities, you can go through the same reasoning that we did for the accounts receivable and try to think of why it's going to follow these rules. What are the rules going to be? Well, if it went from first of all, the rule is it's it's a positive number here. We're going to flip the sign and we made it a negative here. That's the rule for the worksheet. Second of all, we know that it went from 2000 X4 102 down to 17 750. And if it decreases, it's going to do it would do in the opposite of all the assets, it's going to decrease the cash flow from operating or cash flow from operating here. Therefore, it's going to be a negative. Now again, you just want to know the rule. Here's the cheat sheet on the rule. It's going to be obviously the opposite of all assets. And but if you want to think through it, think through it a few times, but have the cheat sheet there if you're going to make the problem or take a test on it. So now the operating activity has the net income plus this plus this plus this plus this minus this. That's what's going to go here. Let's move on to the next account. Next, we've got a short term note payable. So a note payable. Obviously not. Well, it could be a current liability. So you would think I actually could go there, but it's a note. It's a note payable. However, and note what when would a note payable be affected? We're saying it went from 10 up to 15 from 2000 X 4 up to 2000 X 5 by 5000. Why wouldn't we owe more money on a notes payable? Well, maybe we borrowed money and if that happened, we would debit cash and we would credit the no payable. And that has nothing to do with the income statement and therefore wouldn't be in the operating activity. Now, notice we could have borrowed something other than cash. We could have borrowed. I mean, we could have bought something and financed it. But even in that case, it wouldn't be an operating activity. So once again, I'm going to make an assumption. I'm going to say, well, it's either investing or financing. Clearly if we're if we're loaning and borrowing money, that's that's actually a financing activity. It's going to be down here in the financing section. And so we're going to follow our same rules. I'm going to flip the sign. It's a negative here. So I'm going to make it a positive here and the logic being that, well, it went up. Therefore, I'm going to assume that we borrowed cash.  I don't know what really happened. I got to go to the jail and pull out whatever happened in order to figure that out. But before I go pulling the jail and whatnot and parsing this number up, I'm going to make the easy assumption first, just so we can find a home for all these numbers. Then I want to make sure that we are in balance or we are tied out to the change in cash, then go back and parse that out. All right. So let's go to the next one, where we have the long term no payable. Same concept, right? If we bought if it went from here up, then we're going to it has nothing. We're going to assume we borrowed more money and debit cash. We're going to credit the no payable. And once again, it has nothing to do with the income statement. Therefore, it has nothing to do with operating. We are again financing. We're borrowing money. So that's going to be down here in the financing. And again, I'm going to make this assumption. It's it's very likely that something else happened. I'm going to go look at the jail. I'm going to figure it out exactly what happened. But if it went from here up, then I'm assuming that we borrowed cash. Now, if it went down, of course, I would assume that we paid cash on the note. So it's going up. I'm going to assume we borrowed cash. Could it could have been something else that happened? We're going to go in there. We're going to dig through that. There's not going to be too many transactions in the notes payable. General ledger, hopefully, because we didn't like borrow money all year long. Unlike the cash account, obviously would have had a lot of detail in the jail. So we're going to parse that out later and make it yellow. I'm going to say, yeah, I know that we might have something else going on there. But we're going to find a home for all these accounts first going to be in balance. Then we'll go back and parse those out. All right. Then the next two, I'm going to put these two together. Common stock paid in capital. Why? Because note that common stock is us the issuance of stock. That's kind of like the investing of the stock. Now, when we think about common stock, there's two kind of things when we buy common stock. Usually if we buy common stock on the stock market, we're not buying it from the company. We're buying it from other investors. It's not the company issuing stock. If the company issues stock, then the company is the one receiving the money. That doesn't happen like all the time. So the common stock may not change a lot from year to year. Of course, an example problem. We want to have an example of the common stock changing so we can put it in the example problem. So it went from 200 up to 215, meaning we issued stock. So we issued more stock, got more investments in the company in that way. Now, we also have an additional paid in capital. Why? Because remember when we issue stock, we might issue it at a par value, which is just like a made up value so that we can have an even value to the amount posted in the common stock. However, when we sell it, we're going to sell it for whatever we can, which most likely will be higher than the par value. So the additional paid in capital is the amount of money that we issued the stock for above the par value. That's why these two are basically related. That's why I'm going to record them related. So we're going to make the assumption that we debited cash. We sold common stock for cash. So and that means that the change, this 15 and the 30, is us. Is that happening? So not neither part of those accounts are part of the income statement, doesn't have anything to do with operation. It's going to be financing. Why do we issue stock? Because we're financing the company. We're trying to get money into the company through a financing process. And therefore, we're going to assume once again that cash received from issuing of stock is the effect. I'm not going to make that yellow because I happen to know that we don't need to dig down on that. So it's going to go up. And therefore, we're taking that change 15 and 30, flipping the sign. So that 45 negative, flipping it to a positive, we received cash. So in the cash flows from financing, we have this plus this plus this. That's what's going to go here so far. Now, that's what we have so now we found a home for all of these except cash. And therefore, we can add this up and see if the difference adds up to cash. If we have all these going the right way, remember we flipped the sign on all of these. Therefore, if we flip the sign on all of these, it should be equal to the 61 nine. Let's see if that's the case. We got the net income. This is the cash flow from operations. Net income plus this plus this, but this minus this adds up to this 51 650. That's the cash flow. That's how much cash we have received from operations. If it was a negative, we would have cash used from operation cash flows from the investing activities. All we have is this 62 250. It's a negative. So it's a decrease. So we're going to say net cash flows from investing activities is a decrease in cash flows from investing activities. 62 250 operate financing activities. We've got the five plus 225 plus 45. So we borrowed money in this case, it looks like. And we issued stocks. So it's all increases. We're going to add those up to 75. Then the 51 650 plus this minus 62 250 plus the 72 5 add up to 61 9. Yes, that adds up to our change in cash. So we are in balance so far. So that's great that we're looking at so far. However, of course, we have these issues where we're going to go back to some of these accounts and say, you know, we recognize that there's some issues that we're going to figure out and find out systematically how to fix those and see if there's any changes that need to be made to certain accounts. Now, the first yellow account we had was actually net income. That's where we started. We started off with account we were kind of questioned over, but we didn't want to parse out the account at that time because we wanted to go back and do it systematically. Now we know we are in balance here. What we're going to do, I'm going to do something similar to kind of like an adjusting trial balance and say, let's make an adjusting column and let's increase it similar to a debit and credit. Make sure that we increase and decrease something so that we end up with something. Notice this is just adding up this column and this column that is in balance, meaning that we still equal the change in cash 61.9. So if we go back and say, hey, net income is wrong. I know what net income is. It's this it's this 158.100. So if I put that if I start with that, then I have to change it from the 104.5. It's going to go increase by the 53.6 to that number. So I got to increase. So I got to increase net income. But if I do that, then it's going to throw me out of balance. So what would I got to put the other side somewhere? So we got to figure out what that change is. Let's do it systematically. Well, we're going to parse out this number between the two components. So we go look at the GL. It would tell us if it would tell us the activity. If we look at a book problem, then it'll give us something like this. It'll say E says that declared paid cash dividend. We got to just know we'll cash dividend. That means that a journal entry would look like this. I mean, if we paid a cash dividend, that means that we debited the retained earnings because we're taking it out of the retained earnings. That was the difference that we used to come up with this 104.5 that we assumed with all net income. And then we credit cash. That's the journal entry. This would be the now let's think about that journal entry in terms of a change to our cash flow statement, what to accounts, what to names on our cash flow statement can relate to this journal entry to make us have an even adjustment. And of course, net income has to change. So we know that net income has to go from 104.5 up by that amount to in order to get to our net income, which is on the income statement here. And the other side then must be the cash we paid for the dividend. So the cash paid that was paid for the dividend. So we're going to create a new account and say cash paid for dividends, going to put that as part of the as part of the financing activities, which is where the dividends will go. And it's going to go from zero. And now we go at the decrease in cash, decrease in cash. So now we had a change. We had a change to our operating activities went from here to here. We had an equivalent change down here in our financing activities. We're still in balance. So we're that's not going to throw us off. We're good. I see exactly what happened there. Let's go back. Let's go find out our next difference and see what that is. So the next one is depreciation here. So again, what we do is we look on the income statement and say, well, depreciation on the income statement equivalent to this 15, 750, because, you know, we got to that depreciation by looking at the change in the accumulated depreciation, which is usually the recording of the depreciation expense. That's how we came up with this 15, 750. But if we look at the accumulated depreciation, there might be something else affecting it. So we have to compare that. We could first compare this to the income statement, say, hey, what's depreciation expense on the income statement? Well, it's 38, 6. That's not the change in the accumulated depreciation. Well, that means that if I was going to take it from the income statement, then I would have to put this 38, 6. That's what should be there. That's what we have to increase net income by in order to adjust for the depreciation expense that we've reduced it by. And if I was to do that, then I would have to increase this number by 22, 8, 50 to bring it up to that 38, 6. If I do that, well, that's going to throw me out of balance. You know, so we have to do something else. So let's go think about. Let's look at the GL and think about, OK, what's in the GL related to accumulated depreciation other than just recording depreciation expense? What else could affect it? In this case, we sold equipment. When we sell equipment, we also have to account for the accumulated depreciation that is on the books in relation to that particular piece of equipment. Now, this one get a little confusing. If you can get this one, then you have a good understanding, know how this one can really throw you off if we started out with depreciation instead of backing into depreciation. Because if you're at this point in time and you go to your supervisor and say, hey, this depreciation is throwing me off, but I know that I'm on track and I've got everything in balance. But this one thing, I've got to figure out how to adjust this change to account for that this journal entry related to the depreciation. We can dig that out rather than going in and saying, my entire thing doesn't work. I don't know. So if we figured out this journal entry, what would be the journal entry related to that? We can go into our G.O. We can double click on the on the G.O. And our software and we come up and we say, OK, this is what happened. We sold the equipment. We got twenty six thousand fifty four. It that's the cash related to it. We took the equipment off the books. So that particular piece of equipment cost us fifty one. We had to take that off. Equipments of debit. We credited the equipment to take it off the books at fifty one thousand. Then we also had to take the accumulated depreciation related to the equipment off the books, which is what most people often forget. And so obviously all equipment has this other account related to it. Accumulated depreciation, which we must take off the books. So we've got to figure out what how much of the accumulated depreciation is related to this one particular piece of equipment. Make sure to take that off the books. And then the difference is going to be the gain or loss. In this case, a loss. So we'd have to dig out this journal entry and say, OK, that's the journal entry. How can we then convert this journal entry into basically what we need in terms of these accounts up here so that we have an you know, something that's in balance that will keep us in balance. So we know that we have to fix the depreciation account here. So we know that the depreciation is going to be going up by the twenty two eight fifty in order to equal the thirty eight six, which equals what's on our income statement. Then we have the cash received from the sale of equipment. Now, I mean, we got cash up here. We can see the twenty six that we received. And we didn't record that anywhere. We got we sold equipment. We didn't we didn't put that on our cash flow statement. So we got cash from the sale of equipment. And if we receive cash, remember, equipment is an investment. Therefore, it's going to go in the investing activities. We're actually going to create a new line. You might have been wondering why there was a blank line there. We're going to create a new line called cash received from investment activities. I'm going to put that in here. I'm going to add that twenty six here. That's going to be part of it. So we're going to that'll be the other piece part of that. Now, this equipment, this credit to equipment, where did we put that when? Where did we put the change to equipment on our statement of cash flows? We we put that into cash paid for the purchase of equipment. But this part of that decrease had to do with this sale of equipment. So this fifty one thousand wasn't part of the cash paid to purchase equipment in this case. And that's why this fifty one is going to be part of this line item here. So this was the original change. We're going to we're going to put that fifty one negative and say that if we paid all cash for the equipment that we purchased, we must have paid one thirteen to fifty for it. Now, again, that might not be the end of the story because we could have financed part of that or there could be other transactions involved. But we're going to make that adjustment here. And then we have the final loss. Now, notice that this loss, if it has to do with equipment, we want anything related to it to be in the investing activity. And under the income statement, this loss here. So we've already recorded the cash related to this in the investing section. We don't want any of the gain or loss or related to it in the operating section. And when we recorded this loss, it was recorded in the net income in the operating section. Therefore, up here, we have this we we we had this loss included in this one or four or five. That's where this piece is going to go. We're going to create a new line, which again, you probably were wondering why is there like a blank blue line there. We're going to say that, hey, we we brought this net income down by this loss. And we don't want that loss related to the equipment here. We want anything related to the equipment to be in the investing activity. Therefore, we're going to increase the loss here. So that's the adjustment. So this idea here being that we're still kind of in balance. We're not dealing with devs and credits, but we're making this adjustment in such a way that we can figure it out and still remain in this change in cash being the same. And notice I'm checking this figure down here because this figure should be pulling over here as well. So I'm just looking as of this line item at this time right now. All right, so then we have the next item that happened. So we have we have the purchase of equipment. We're taking a look at this next yellow item, which we had a yellow item for. And we're going to dig down on that and say we had a purchase of equipment. Is there anything else related to that in basically the equipment account? And here we had we had a purchase of equipment, which cost one thirteen to fifty and we pay cash forty five to fifty for it. So what must have been the journal entry? We can go stick to the jail find the journal entry and we must have debited cash one thirteen to fifty. I'm sorry. We debit equipment for the cost of equipment one thirteen to fifty. We credited cash. That's how much we put down on the equipment. Then we financed the rest for the seventy thousand. So then the question is, well, how are we going to convert that to basically the accounts over here in order to make this cash paid for the purchase of equipment? What it should be on a cash basis? And part of that is going to be here. Now, remember last time we brought it up by the fifty one thousand from the last transaction and we were at one thirteen to fifty in this amount. And that would be what? How much cash we had paid if we had paid all cash? Now, this journal entry said we didn't pay all cash. We paid. We financed part of it and we only paid forty three to fifty in cash. Therefore, we're going to bring it down by the seventy. So now we're adding to this cell is the fifty one thousand from last time plus the seventy so that we end up with the cash that was actually paid for equipment, which was the forty three to fifty. The other side of this is remember what we had was the change in the debt down here. It was the twenty two five and part of that now that we dig down into it had to do with this this debt change from this transaction. Therefore, the other side of this is going to be going to the cash paid for long term debt and we had to actually flip the name of the notes. Now we've got it was cash received. Now we realize that it really it's a cash payment here. So we flipped the name and said the twenty two five minus the seventy brings it down to what it should be, which is the forty seven five. So now if we look at the final process here, notice that last time we basically have been stopping at the change in cash sixty one nine the sixty one nine. And that of course adds up to the sixty one nine up here, the change in cash. So remember, that's what we found a home for everything. And we've and we looked at the change in cash. Now when we think about other financial statements that we don't see the change in cash on the financial statements, if we only have the financial statements as of two thousand X five. So we don't want to end the fight the cash flow statement as the change in cash. We really want to end it with the ending cash balance. And that's easy enough to do. So right, we're going to say, well, if that's the change in cash, we're just going to say, hey, let's just let's just add that to the beginning cash balance and we'll back into the cash balance as of the end of the time period. So really, this is our verification figure. This is the easiest one for me to use when we are creating the cash flow statement. But of course, when we're comparing the statements, we want to end with the amount of cash at the end of the time period. So if this is the change and we add to it, what was in there at the beginning, which is this number, then we will end up with the cash flow as of the end of the time period, that point in time on the balance sheet so that we can compare the cash flow to the balance sheet, which would be equal to this number here. And again, if we do this change, notice what we have now is we started with these. This column represents us finding a home for all of these numbers without thinking about parsing them out into their separate parts. This column represents us parsing them out, going through the thought process and parsing them out in a systematic way. And note how some of those were pretty complicated to first to parse those out. If we try to do that as we go, it is very easy to get out of whack and then get to the end of the problem, not to be tied out to the change in cash and have no idea really exactly where the problem is at. So I recommend putting together a system so that you can then think through those problems and take it to a supervisor or something and have a very pinpoint place at where you are out and try to be able to explain as clearly as possible what the problem is to save, you know, as much time as possible. Then note that we can have the change over here that will will result. So our ending numbers are here. So here's our ending numbers. Here's our cash flow that we can then plug into a cash flow statement or just, you know, hide these lines here. These are our ending numbers. Here's our the names of the items within the cash flow statements. Again, if you're working a problem in cash flow, there's two types of things you're going to have to know. You've got to memorize operating, investing, financing. And if you know which items go in which section, you can get a lot of points on that. If you're actually going to create a cash flow statement, then you really want to come up with a systematic way to do it because it can be somewhat difficult to make sure that everything ties out towards the end. So we're now able to define a statement of cash flows, create a statement of cash flows, explain a process of creating a statement of cash flows designed to limit mistakes, define the indirect method.