Bank Balance and Operating Activity

Bank balance is a key indicator of a company's financial health. It represents the amount of money a company has in its bank account at a given point in time. The bank balance can increase or decrease due to various activities. In this context, it is important to understand how the increase or decrease in the bank balance is associated with the operating activity.

Operating activity is the primary business activity of any company. It involves the day-to-day activities of a company, such as production, sales, and distribution of goods and services. The operating activity generates revenue and incurs expenses, which impact the bank balance.

Increase or Decrease in Bank Balance

The increase or decrease in the bank balance can be attributed to the following factors:

1. Revenue: If a company generates more revenue than its expenses, it will have a surplus cash flow, which can increase the bank balance.

2. Expenses: If a company incurs more expenses than its revenue, it will have a negative cash flow, which can decrease the bank balance.

3. Accounts receivable: If a company has accounts receivable, it means that it has sold goods or services to customers on credit. When the customers pay their dues, it increases the bank balance.

4. Accounts payable: If a company has accounts payable, it means that it owes money to its suppliers. When the company pays its dues, it decreases the bank balance.

5. Depreciation: Depreciation is a non-cash expense that reduces the value of assets over time. It does not impact the bank balance directly.

Operating Activity and Bank Balance

The operating activity directly impacts the bank balance. The increase or decrease in the bank balance is a result of the operating activity. The operating activity generates revenue and incurs expenses, which impact the cash flow. The cash flow, in turn, impacts the bank balance. Therefore, the increase or decrease in the bank balance is attributed to the operating activity.

Conclusion

In conclusion, the increase or decrease in the bank balance is associated with the operating activity. The operating activity generates revenue and incurs expenses, which impact the cash flow, and, in turn, impact the bank balance. Therefore, the operating activity is considered as the primary factor that determines the increase or decrease in the bank balance.