We want to add back this depreciation to the profit so our cash from operations is going to be $50,000.

And what I'm going to show you here is, To figure out the cash from operations from actually how much cash the operations are producing. So the depreciation in each of these periods is $20,000. So $20,000 over 3 years is the life of that truck. It's not just the expent value of the truck, we're spreading that cost over 3 years. And then we have depreciation, and we want to think a little bit in this video, what does the depreciation do to the cash flow statement? So I'll just write down the number first. We're assuming nothing shady is happening with the Accounts Payable, Accounts Receivable, that they're not changing over the course of the year. Our profit here, if we just take the number that we have here, Our profit in the first period is $30,000. So let's just think about this a little bit. and hopefully we'll understand this in a little bit Now remember, the cash flow statement is really a way of reconciling the profit with the starting and the ending cash. So you would actually put the $60,000 right over here, on capital expenditures. And on the cash flow statement you express that saying 'I spent $60,000 on Capital Expenditure' sometimes it's 'property plant and equipment'. We know from our example that we used that $60,000 to buy a $60,000 truck. So let'a just say that at the beginning of this fiscal year, when I started this company, I had $60,000. I'm not really showing all the expenses or all of the details that you would actually have for a shipping company but we really just care about the accounting. Now I say it's simplified because this is a very simplified income statement for each of these periods. Let's see if we can better understand what a cash flow statement for my simplified shipping truck example company would actually look like.

Operating cashflow