The statement of cash flows, again, begins with the heading, the title of the company, the title of the statement, Statement of Cash Flows, and a date. The statement of cash flows covers a period-- in this case, for the month ending June 30-- just like the income statement did and the owners' equity statement.

The cash flow statement is divided into three sections. Cash flows from operating activities, cash flows from investing activities, and cash flows from financing activities. Let's look at each section separately.

Cash flows from operating activities include all of the items that are reported in the income statement, but on a cash flow basis. For example, on our income statement, we see revenues reported. What we want to isolate for the cash flow statement is the cash received from customers to earn those revenues.

So the actual cash received from customers for A&N Lawn Care was $2,450. You might recall that revenues that they had during their first month of operations totaled $2,500. But one customer still owed them $50, so that $50 has not been received in cash. So the cash received from customers is only $2,450, and that's why we see the $2,450 on the cash flow statement.

Also reported on the income statement are all of the expenses. So again, we're going to focus on the cash flows that were paid out for those expenses in the operating section of the cash flow statement. So for A&N Lawn Care for June, we had cash paid for advertising, $30, and cash paid to suppliers for $1,200. And that included the $100 for small tools and supplies, the $500 for fuel, and the $600 for fertilizer.

Now both the cash paid for advertising and the cash paid to suppliers for the various other expenses are noted in parentheses. So we have parentheses around those numbers to indicate that is a cash outflow. The cash received from customers, of course, is a cash inflow, and that's shown as a positive number. Altogether, our total net cash from operating activities is $1,220, and that's a positive cash inflow.

The next section is the investing section. In that section of the cash flow statement, we would report all of the cash inflows and outflows to invest in assets. In the case of A&N Lawn Care, they purchased equipment for $310. That was a cash outflow. And that cash outflow included the purchase of their lawn mower and their trimmer. So $310 for that cash outflow as an investing activity.

Cash flows from financing activities include transactions with outside parties that they borrow money from. So it has to do with borrowing and also using contributed capital. So those are both financing-type activities.

Using contributed capital is one example of a transaction with an owner. So another type of transaction with an owner is paying distributions. So any transactions with owners, as well as any borrowing or paying off of loans, would be in the financing section. For A&N Lawn Care, we have the contributions from the owners, which is an inflow of $1,000, positive amount, and the distributions to owners, which is an outflow of cash. So $200 of cash was paid to the owners as a distribution. If they had borrowed money, that would be an inflow in financing activities. Companies who borrow money and then pay it back over time would count the payback of the principal amount of the loan as a cash outflow.

At the bottom of the statement of cash flows, you see a calculation, which is known as the reconciliation of cash. The reconciliation begins with the total net increase or decrease in cash from each of the three sections that we've just talked about. So here we have a $1,220 cash inflow from operating activities, we have the $310 outflow from investing activities, and we have the total inflow or positive amount of $800 from financing activities.

So those three numbers, the $1,200, the minus $310, and the $800 add up to $1,710 as the net increase in cash. We're going to add that to the cash balance at the beginning of the period, which in this case was zero, because A&N Lawn Care is a brand new business, and they didn't have any cash to begin with. So the net increase in cash of $1,710 is also the cash balance at the end of the period. And that cash balance should agree with the balance sheet amount. And we'll see when we look at the balance sheet for the period ending June 30, we'll see that that is the case, that this cash balance from the cash flow statement agrees with the ending cash balance on the balance sheet of A&N Lawn Care at the end of June.