[sfalk1]

Dear Instructor,

This semester I am taking Finance 330. I understand everything except when it comes down to determining the difference between a source and use of funds. I understand that use of funds is issuing money, and source of funds of borrowing money, and that an increase in assets and decrease in liability is called a use (decrease in assets and increase in liability is a source. However, I am still unclear as to why a negative cash flow from assets can be a use and then in another equation our instructor told us it was a source . How do you know if the cash flow from assets is on the left or right? (he said it had to do with that). If cash flow to creditors and cash flow to stockholders are negative then they are sources. I still need a better way to tell if it's a source or a use. If you have any ideas or helpful way of explaining this concept please let me know as soon as possible. I have a quiz on Tues.

Sincerely,
Confused student

[wingrun]

I always had difficulties with this but I guess if your major is accounting you will eventually get used to it. Just a few tips to ease your memory of source and use, credit and debit.

If asset goes up, it's a use.
If asset goes down, it's a source.

If a Liability or Equity goes up, it's a source. (you can tell it's the opposite of asset).
If a Liability or Equity goes down, it's a use.

Even an easier way to remember:
A down = source
A up = use
L,E up = source
L,E down = use.

as for credit and debit and which side to add the number, here's the way to remember it:

ASSET | LIABILITY/EQUITY
+ - | - +

I tried to make the above look like a balance sheet. Hopefully this helps.