This paper demonstrates the use of the basic accounting equation to provide the logic
behind the steps commonly described in current accounting textbooks to reconcile net income
to cash flow from operating activities. Such a framework provides students a better understanding
of the indirect method of calculating cash flow from operating activities. A step-bystep
analysis is provided to demonstrate how cash flow can be obtained using the basic
accounting equation. The analysis provided in this paper also highlights the articulation of
financial statements.