bookspec/examples/cash-flow.paid-on-the-companys-behalf.toml

id = "cash-flow.paid-on-the-companys-behalf"
title = "A member and a lender pay for the company directly; the member is repaid"
rule = "When a member or a lender pays a company expense or purchase directly, with no cash account moving, the statement of cash flows MUST show a financing inflow (borrowed from the member or lender, or contributed when the member's capital is credited for an expense) and the operating or investing outflow, both on that payment's date; repaying the member or lender MUST be a financing outflow; such a payment and its reversal MUST net out together."
# CHOICE: ASC 230 does not address cash a third party pays on the entity's
# behalf. The firm guides present it by substance as a constructive
# receipt and disbursement (PwC 6.9.3.1; Deloitte 7.2, Example 7-2, a
# lender paying an insurer; BDO 3.4, Example 3-5, a bank paying the
# supplier of equipment, and a parent paying a subsidiary's expenses),
# and the owner chose that (wanderbooks D-42). KPMG also accepts a noncash
# presentation for equipment a lender pays for.
status = "CHOICE"
sources = [
  "ASC 230-10-45-13(c)",
  "ASC 230-10-45-14(a)",
  "ASC 230-10-45-14(b)",
  "ASC 230-10-45-15(b)",
  "ASC 230-10-45-17(b)",
  "PwC Viewpoint, Financial statement presentation 6.9.3.1 (cash a third party receives or pays on the entity's behalf is included as though through the entity's accounts)",
  "Deloitte Roadmap, Statement of cash flows 7.2 (constructive receipt and disbursement; Example 7-2)",
  "BDO Blueprint, Statement of cash flows under ASC 230 (December 2025) 3.4 and Example 3-5",
  "EY Financial reporting developments, Statement of cash flows (July 2026) 4.6.2 and 5.3.1",
  "wanderbooks D-42 (owner, 2026-10-20: a member or lender paying for the company is cash borrowed and spent)",
]
tags = ["accrual", "book", "us", "cash-flow", "constructive", "partnership"]

[setup]
currency = "USD"
fiscal_year_start = "01-01"
basis = "accrual"
rounding = "half-even"
cash_accounts = ["1000"]
financing_accounts = ["2100", "2500"]

[[setup.accounts]]
code = "1000"
name = "Cash"
type = "asset"

[[setup.accounts]]
code = "1500"
name = "Equipment"
type = "asset"

[[setup.accounts]]
code = "1510"
name = "Accumulated depreciation"
type = "asset"

[[setup.accounts]]
code = "2100"
name = "Due to members"
type = "liability"

[[setup.accounts]]
code = "2500"
name = "Bank loan"
type = "liability"

[[setup.accounts]]
code = "3000"
name = "Capital — Member A"
type = "equity"

[[setup.accounts]]
code = "6000"
name = "Supplies"
type = "expense"

[[setup.accounts]]
code = "6100"
name = "Depreciation"
type = "expense"

[[setup.fixed_assets]]
cost_account = "1500"
accumulated_account = "1510"
expense_account = "6100"

[[setup.members]]
name = "Member A"
capital_account = "3000"

[[events]]
date = "2026-03-02"
description = "Member A contributes cash"
lines = [
  { account = "1000", side = "debit", amount = "1000.00" },
  { account = "3000", side = "credit", amount = "1000.00" },
]

[[events]]
date = "2026-03-05"
description = "Supplies, paid by Member A personally (owed back)"
lines = [
  { account = "6000", side = "debit", amount = "120.00" },
  { account = "2100", side = "credit", amount = "120.00" },
]

[[events]]
date = "2026-03-09"
description = "Equipment, paid to the seller by the bank (a loan)"
lines = [
  { account = "1500", side = "debit", amount = "2400.00" },
  { account = "2500", side = "credit", amount = "2400.00" },
]

[[events]]
date = "2026-03-12"
description = "Supplies, paid by Member A personally (contributed)"
lines = [
  { account = "6000", side = "debit", amount = "45.00" },
  { account = "3000", side = "credit", amount = "45.00" },
]

[[events]]
date = "2026-03-15"
description = "Supplies, paid by Member A personally (posted in error)"
lines = [
  { account = "6000", side = "debit", amount = "30.00" },
  { account = "2100", side = "credit", amount = "30.00" },
]

[[events]]
date = "2026-03-16"
description = "Reverse entry 5"
reverses = 5

[[events]]
date = "2026-03-20"
description = "Reimburse Member A"
lines = [
  { account = "2100", side = "debit", amount = "120.00" },
  { account = "1000", side = "credit", amount = "120.00" },
]

[[events]]
date = "2026-03-28"
description = "Loan payment"
lines = [
  { account = "2500", side = "debit", amount = "200.00" },
  { account = "1000", side = "credit", amount = "200.00" },
]

# By hand, March. Operating: entry 2, -120.00, and entry 4, -45.00 (cash
# paid to suppliers, 45-17(b), by the member for the company): -165.00;
# entries 5 and 6 net out. Investing: entry 3, -2,400.00 (equipment,
# 45-13(c), paid by the bank). Financing: entry 1 +1,000.00 and entry 4
# +45.00 (contributions, 45-14(a)), entry 2 +120.00 and entry 3 +2,400.00
# (borrowing, 45-14(b)), entry 7 -120.00 and entry 8 -200.00 (repayments,
# 45-15(b)): +3,245.00. Sum -165.00 - 2,400.00 + 3,245.00 = +680.00, the
# change in cash (1,000.00 - 120.00 - 200.00). Net income -165.00 equals
# operating: no reconciling item. Nothing is disclosed: no part of any
# entry went unsettled.
[[expect]]
query = "cash_flow"
from = "2026-03-01"
to = "2026-03-31"

[expect.values]
operating = "-165.00"
investing = "-2400.00"
financing = "3245.00"
net_change = "680.00"
cash_beginning = "0.00"
cash_ending = "680.00"
difference = "0.00"
net_income = "-165.00"
"operating.2" = "-120.00"
"operating.2.on_behalf" = "-120.00"
"operating.4" = "-45.00"
"operating.count" = "2"
"investing.3" = "-2400.00"
"investing.3.on_behalf" = "-2400.00"
"investing.count" = "1"
"financing.1" = "1000.00"
"financing.1.on_behalf" = "0.00"
"financing.2" = "120.00"
"financing.2.on_behalf" = "120.00"
"financing.3" = "2400.00"
"financing.3.on_behalf" = "2400.00"
"financing.4" = "45.00"
"financing.4.on_behalf" = "45.00"
"financing.7" = "-120.00"
"financing.7.on_behalf" = "0.00"
"financing.8" = "-200.00"
"financing.count" = "6"
"noncash.count" = "0"