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Next you need to include changes Assets that affect Cash Flow from Investment Activities. You need to think about how changes in these accounts affect cash in order to identify what way income needs to be adjusted. When an asset increases during the year, cash must have been used to purchase the new asset. Thus, a net increase in an asset account actually decreased cash, so we need to subtract this increase from the net income. The opposite is true about decreases. If an asset account decreases, we will need to add this amount back into the income. Here's a general rule of thumb when preparing an indirect cash flow statement:

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Final you need to include changes caused by to Cash Flow from Financing Activities. If you weren't confused by the assets part, you might be for the liabilities section. Since liabilities have a credit balance instead of a debit balance like asset accounts, the liabilities section works the opposite of the assets section. In other words, an increase in a liability needs to be added back into income. This makes sense. Take a change in a loan account for example. If the loan is increased, it means we borrowed more cash for the business. Thus, this amount
should be added back. Here's a basic tip that you can use for all liability accounts:

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Here is the

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Training: Manually Maintaining the Operational Chart of Accounts