UNDERSTANDING ACCOUNTING TALK 29 The Cash Flow Statement: Financing Activities

In the Cash Flow Statement, Financing Activities generally mean that the business is raising cash for its operations through a borrowing or using its available cash to retire a loan (payment of the principal) or servicing the interest of a loan.

Naturally, when a loan is obtained (or a note / IOU is undertaken), there is an increase in Cash. When the loan is paid or the note retired (or interest is paid on the loan / note), there is a decrease in Cash.