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watchado_charle
Nov 16, 2012, 02:19 AM
Why is an increase of assets a use of funds and a decrease a source of funds? Why is an increase in Liability and OE a source of funds and an increase a use of funds?

paraclete
Nov 16, 2012, 06:22 AM
Why is an increase of assets a use of funds and a decrease a source of funds?

In order to acquire assets the purchase must be funded in some way, thus it is a use of funds. If you sell an asset you gain funds.

Why is an increase in Liability and OE a source of funds and an increase a use of funds?

When you borrow you have increased available funds, when you expend available funds you use funds.

These concepts are simple and require thought to see the implicationss