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    watchado_charle's Avatar
    watchado_charle Posts: 1, Reputation: 1
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    #1

    Nov 16, 2012, 02:19 AM
    Increase in assets are use of funds
    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's Avatar
    paraclete Posts: 2,706, Reputation: 173
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    #2

    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
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