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Statement of Cash Flows: Hyacinth Indira D. Hipe

Conceptual Framework Lesson 4

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Raphael Galit
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69 views7 pages

Statement of Cash Flows: Hyacinth Indira D. Hipe

Conceptual Framework Lesson 4

Uploaded by

Raphael Galit
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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STATEMENT OF CASH FLOWS

HYACINTH INDIRA D. HIPE

LEARNING OUTCOMES
At the end of this module, you should be able to:
• To understand the nature and purpose of a statement of
cash flows.
• To understand the concept and components of cash and
cash equivalents.
• To know the classifications of cash flows as operating,
investing and financing.
STATEMENT OF CASH FLOWS is a component of financial
statements summarizing the operating, investing and financing activities
of an entity.

The primary purpose of a statement of cash flows is to provide


relevant information about cash receipts and cash payments of an
entity during a period.

CASH AND CASH EQUIVALENTS


The statement of cash flows is designed to provide information about
the change in an entity’s cash and cash equivalents.
Cash comprises cash on hand and demand deposits.
Cash equivalents are short-term highly liquid investments that are
readily convertible to known amount of cash and which are subject to an
insignificant risk of change in value.

EXAMPLES OF CASH EQUIVALENTS

Classification of cash flows


The statement of cash flows shall report cash flows during the period
classified as operating, investing and financing activities.
OPERATING ACTIVITIES are the cash flows derived primarily from
the principal revenue producing activities of the entity.
Examples of cash flows from operating activities are:

INVESTING ACTIVITIES are the cash flows derived from the


acquisition and disposal of long-term assets and other investments not
included in cash equivalent.
Examples of cash flows from investing activities are:
FINANCING ACTIVITIES are the cash flows derived from the equity
capital and borrowings of the entity.

Examples of cash flows from financing activities are:

PAS 7, paragraph 43, provides that investing and financing transactions


that do not require use of cash or cash equivalents shall be EXCLUDED
from the statement. A STATEMENT OF CASH FLOWS is strictly a cash
concept.
SUMMARY: INTEREST AND DIVIDENDS
illustration - amounts are assumed

Cash and cash equivalents - January 1 3,000,000

Cash and cash equivalents - December 31 7,400,000


REFERENCES

Millan, Z. B. (2020). Conceptual Framework and Accounting Standards.


Sampaloc, Manila: Bandolin Enterprise

Valix, Conrado. T (2020). Conceptual Framework and Accounting


Standards. Manila: GIC Enterprises & Co., Inc.

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