Accounting Questions - Inventory and Cash Flow Statement

Correct. The cash account is not touched until the money actually changes hands. In the meantime, you would journalize the sales, inventory, cost of goods sold, a/p, and a/r accounts depending on the transactions. Imagine what would happen if a bookkeeper for a small company recorded all sales immediately into the cash (various bank sub-accounts) account and tried to cut checks to pay bills based on those numbers. I ran into this problem with a restaurant that immediately recognized credit card sales as cash and didn't understand why their checks kept bouncing.

In a related matter, if you withdrew $100 from an ATM, would you consider it an expense or just a transfer of assets until you used the cash?

and finance on the side for investing purposes and growth. I'm currently r eading a very basic book dealing with financial statements. My question is about inventory. The book states if inventory increases then cash has dec reased and if inventory decreases cash has increased.

ived cash for the inventory?

be you sold the inventory on credit increasing account receivable? I both cases, no cash has actually went into or out of the business.

Thank you.

On the related matter, I'd consider it a transfer of cash until I used it.

Is that correct thinking? John

Yes, of course. You could have it in your pocket for weeks before you use it. Personally, I don't keep track of where it specifically goes as I spend it unless I make a major cash purchase. I have a Misc. Cash account in Quicken, debit it when I withdraw cash, and count what is left in my wallet each week and credit the difference.