Investing and financing flows

Investing and financing flows are found by rebuilding the ledger accounts and finding the balancing figure.

• Fixed asset account: opening + purchases − cost of assets sold = closing. The balancing figure is usually the purchase.
• Accumulated depreciation account: opening + charge for the year − depreciation on assets sold = closing.
• Sale proceeds of an asset = its book value + profit (or − loss) on sale.
• Loan account: opening + new loans − repayments = closing.

Example: land rises from 80,000 to 1,20,000, and land costing 30,000 was sold for 45,000 during the year. 80,000 − 30,000 + purchases = 1,20,000, so purchases = 70,000. Investing: +45,000 − 70,000 = (25,000). The profit of 15,000 was deducted in the operating section.

Show gross figures: purchases and sales of assets separately, and loans raised and repaid separately, never just the net change.

Remember: depreciation is not a cash flow at all. It is added back in the operating section and never appears under investing.