PILAR COLLEGE OF ZAMBOANGA CITY, INC.

R.T. LIM BOULEVARD, ZAMBOANGA CITY

BASIC EDUCATION DEPARTMENT

PAASCU Accredited Level III
A.Y. 2020-2021

SENIOR HIGH SCHOOL

GRADE 11

LEARNING
MODULE in
FUNDAMENTALS OF ACCOUNTANCY,
BUSINESS & MANAGEMENT (ABM) 2

Unit Topic: Analysis and Interpretation of Financial Statements

Lesson 3: The Statement of Changes in Equity
The Cash Flow Statement

Jade A. Salvador
NAME: ______________________________________________
11 - Our Lady of Mt. Carmel
SECTION: ___________________________________________

MRS. ROWENA L. ESTERO

TEACHER
 Subject Area: Fundamentals of Accountancy, Business & Management 2 Quarter: FIRST
Unit Topic: Analysis & Interpretation of Statement Statements Time Allotment: 180 minutes

Lesson 3: STATEMENT OF CHANGES IN EQUITY

& CASH FLOW STATEMENT

INTRODUCTION

The statement of changes in equity aids the users of financial statement to identify the factors that cause a
change in the owners’ equity over the accounting periods. The statement of changes in equity discloses
significant information about equity reserves that is not presented separately elsewhere in the financial
statements which may be useful in understanding the nature of change in equity reserves.

A cash flow statement, on the other hand, provides data regarding all cash inflows a company receives
from its ongoing operations and external investment sources. It is an important document that helps open a
wind interested parties insight into all transactions that go through a company.

In this lesson, the main focus for discussion is the different forms of the business organizatio, The
components and structures of a Cash Flow Statement, and the preparation of a Statement of Changes in
Equity and a Cash Flow Statement.

OBJECTIVES:

Students will be able to:

a. define and describe the different forms of business organization;
b. determine and describe the components and structures of a Cash Flow Statement;
c. prepare a Statement of Changes in Equity and a Cash Flow Statement of a single proprietorship
business; and
d. demonstrate accuracy, open-mindedness, diligence and patience in performing the discussion,
activities and the preparation of the statement of changes in equity and cash flow statement of a
single proprietorship.

DISCUSSION

Answer this trivia:

How do you value a business? What

are some ways on how to determine the
value of a business?

Analysis & Interpretation of Financial Statements / SCE & CFS Page 1 of 9 11

 DISCUSSION

What are the Forms of Business Organization?

SOLE OR SINGLE
1 PROPRIETORSHIP

Sole or Single Proprietorship is a A partnership is a business entity owned by

business entity owned by one person two or more persons called partners who have
called a single proprietor. Small retail agreed to contribute money, property and
stores and professionals (CPA, Lawyer, industry to a common fund with the intention
Physician, etc.) owned by a single person of dividing the profits among themselves.
or working as individual practitioners are Many small businesses and most professional
examples of a single proprietorship service groups are partnerships.
business.

Cooperative is an organization
established by individuals to
provide themselves with goods
and services, or to produce and
dispose the products of their
labor.

3 CORPORATION 4 COOPERATIVE

A corporation is a business registered as an

artificial person under the operation of the law.
Its existence is evidenced by its Articles on
Incorporation and Corporate By-Laws registered
with the Securities and Exchange Commission
(SEC). A corporation that issues shares of stocks
to stockholders is called a profit corporation. A
corporation that does not issue a stock is a
nonprofit corporation.

Analysis & Interpretation of Financial Statements / SCE & CFS Page 2 of 9

11
 DISCUSSION
What is an SCE and CFS?

A Statement of Changes in Equity (SCE)

Statement of Changes in Equity, often referred APPLE FRESH LAUNDRY SERVICES
to as Statement of Retained Earnings, details Statement of Changes in Owner’s Equity
the change in owners' equity over an For the year ended December 31, 2019
accounting period by presenting the movement
in reserves comprising the shareholders' equity.
A, Capital \P 259,000
Add: Additional Investment P 50,000
Movement in shareholders' equity over an Net Income 155,000 205,000
accounting period comprises the following Sub-Total P 464,000
elements: Less: Drawings 30,000
Total Owner’s Equity P 434,000
 Net profit or loss during the accounting
=======
period attributable to shareholders
 Increase or decrease in share capital
reserves
 Dividend payments to shareholders
 Gains and losses recognized directly in
equity APPLE FRESH LAUNDRY SERVICES
 Effect of changes in accounting policies Statement of Cash Flowa
For the year ended December 31, 2019
 Effect of correction of prior period error

What Is a Cash Flow Statement (CFS)? Cash Flows from Operating Activities:
Receipts
A cash flow statement is Collections from customers P177,000
a financial statement that provides aggregate Rent Income 35,000
data regarding all cash inflows a company Dividend Income 10,000
Interest Income 6,000
receives from its ongoing operations and
Payments:
external investment sources. It also includes all Operating Expenses (143,600)
cash outflows that pay for business activities Interest Expense (3,400)
and investments during a given period. Net Cash from Operating Activities P 81,000

A company's financial statements offer Cash Flows from Investing Activities:

investors and analysts a portrait of all the ======
Receipts
transactions that go through the business, Proceeds from sale of equipment 16,000
where every transaction contributes to its Proceeds from sale of furniture 10,000
success. The cash flow statement is believed to Payments:
For purchase of furniture (32,000)
be the most intuitive of all the financial Net Cash Flows from Investing Activities ( 6,000)
statements because it follows the cash made by
the business in three main ways—through Cash Flows from Financing Activities:
operations, investment, and financing. The sum Receipts
of these three segments is called net cash flow. Additional Investment of Owner P 50,000
Proceeds of bank loan 200,000
The components of the cash flow statement are Payments:
classified into the following activities: Cash withdrawal of owner (30,000)
1. Operating – the inflows and outflows of cash Payment of bank loan (150,000)
Net Cash Flows from Financing Activities 70,000
from the normal operating activities of the
business. Net Increase/Decrease in Cash P 145,000
2. Financing – inflows and outflows of cash Cash balance – January 1 155,000
from the sale or purchase of assets other
than inventory. Cash Balance – December 31 P 300,000
=======
3. Investing – inflows and outflows of cash
from the owners and creditors of the
enterprise.

11
Analysis & Interpretation of Financial Statements / SCR & CFS Page 3 of 9
 PILAR COLLEGE OF ZAMBOANGA CITY, INC.
R.T. LIM BOULEVARD, ZAMBOANGA CITY

BASIC EDUCATION DEPARTMENT

PAASCU Accredited Level III
A.Y. 2020-2021

SENIOR HIGH SCHOOL

GRADE 11

RETURN THIS
MODULE 3
FUNDAMENTALS OF ACCOUNTANCY,
BUSINESS & MANAGEMENT (ABM) 2
Unit Topic: Analysis and Interpretation of Financial Statements
Lesson 1: The Statement of Changes in Equity
The Cash Flow Statemeny
Lesson’s knowledge Check (Activity 1)
Activities 2 to 5
Assessment Page

Name: Jade A. Salvador Date Returned:

Section: 11 - Our Lady of Mt. Carmel

MRS. ROWENA L. ESTERO

TEACHER
 Kindly answer the lesson’s knowledge check, activities 1 to 5 and the assessment part with all
honesty and sincerity. You may write your answers in the indicated spaces of the activity.
.

KNOWLEDGE CHECK

ACTIVITY 1: SURVEY SAYS!

Read the following questions and write your answer on the space provided for.
1. What do I understand about the Statement of changes in owner’s equity? What is the relationship of
the SCE with the Statement of Comprehensive Income?
The understandings of Statement of Changes in Equity revolves around business transactions
wherein it measures the changes in owner's equity along with a specific period. It defines as the
reconciliation of opening and closing balances of equity in a company during a specific period.
The Statement of Changes in Equity directly relates to the income statement and the balance
sheet. The statement of changes in equity records the movement of equity as reported in the
balance sheet.
2. What advantages will I get from the study of the statement of owner’s equity and the cash flow
statement? How can these two statements help me as a student of this institution?

It allows students of financial statements to see what factors they could

I
change in their equity during their accounting period. As for students, it
determined overall financial health and stability of business transaction.

3. Integration No. 1: (ICV) What values am I expected to learn and develop in the process of studying
the statement of changes in equity and the cash flow statement? Why?
Values that we can get from studying Statement of Changes in Equity are
improvements and getting good investments. It will produce additional
investments once the company would disclose the details of those transactions
in the SCE as well.
4. Integration No. 2 (Social Integration) How can I make use of my knowledge of the Statement of
changes in equity and cash flow statement to help the other members of my community?
The use of knowledge of the Statement of Changes in Equity provides additional
information to people surrounding that cash transactions are important to put attention
on it. It will reduce robs if you know where and when your money goes.

5. Integration No. 3 (Lesson Across Discipline - Economics) Why is the Cash Flow Statement
important to the users of financial information? What components do the CFS have that makes it
important to them?
The Cash Flow Statement (CFS) provides vital information about an entity. It shows the movement
of money in and out of a company. It helps investors and shareholders understand how much
money a company is making and spending. It enables investors to use the information about
historic cash flows of a company for projections of future cash flows on which to base their
investment decisions.
Short Essay Rubric:

Standard Excellent Very Good Good Fair

 Explains the topic with correct description and
provides related examples. 5 4 3 2
 Content shows connection of the concept and explains
sensible decision about the topic that can help achieve
the goal.

Analysis & Interpretation of Financial Statements / SCE & CFS Page 4 of 9

11
 ACTIVITIES

ACTIVITY 2: Classify the Components of the CFS!

Direction: Below is a list of the basic components of the Cash Flow Statement. On the blank provided
before each number, write the component to which the statement refers to. Write only the
LETTER of your choice on the space provided below.

A. Operating B. Financing C. Investing

Activities Activities Activities

A
_________1. A
Interest, dividends, and other income received ________ 6. Interest Expense
B
_________ 2. Purchase of equipment B
________ 7. Payment of loan balance
B
_________ 3. Cash withdrawal of owner _________
A 8. Employees’ salaries
B
_________ 4. Additional investment of owner B
_________ 9. Sale of property
C
_________ 5. Royalties, fees, commissions received A
_________ 10. Other operating expenses

ACTIVITY 3: TRUE OR FALSE!

Direction: In the space provided before the statement, write TRUE if the statement is correct or FALSE
if the statement is incorrect.
FALSE 1. Professional service groups owned by two or more individuals are the typical
___________
examples of corporate form of business.
TRUE
____________2. A business form exclusively owned by an individual is a single proprietorship
business.
FALSE 3. Merchandising business produces its own goods to sell.
___________
FALSE 4. Whether the business is a single proprietorship, partnership or corporation, it
___________
acquires assets, incurs liabilities and expenses separate from its owner(s).
TRUE 5. Cooperative is a form of business organization that is not principally for profit.
___________
TRUE 6. The initial investments and additional investments are shown in the statement of
___________
changes in equity.
TRUE
___________ 7. Withdrawals, net income or net loss for the year are shown in the cash flow
statement.
FALSE 8. The cash inflows and cash outflows arising from the normal operations of the
___________
business are recorded under the financing activities.
TRUE
___________ 9. Payments of cash to suppliers for services and goods acquired, employees’ salaries
and government licenses and taxes are cash outflows recorded under operating
activities of the business.
TRUE
___________ 10. Receipts of cash from proceeds of loan is a financing activity of the business.

11
Analysis & Interpretation of Financial Statements / SCE & CFS Page 5 of 9
 ACTIVITIES

ACTIVITY 4: CASH IN AND CASH OUT!

Direction: Information taken from the records of Fox Rental Service revealed the following account
balances, Prepare a Cash Flow Statement for the year ended December 31, 2019.

Collections from: Owner’s contribution P500,000

Cash services P200,000 Owner’s withdrawals ( 10,000)
Notes receivable 100,000
Rent Income 50,000
Interest Income 1,000 Purchase of equipment P 24,000
Payments of:
Salary (250,000)
Interest expense ( 500)

FOX RENTA; SERVICE

Cash Flow Statement
For the year ended December 31, 2019

Analysis & Interpretation of Financial Statements / SCE & CFS Page 6 of 9

11
 ACTIVITIES

ACTIVITY 5: THINK ABOUT IT!

Direction: Answer the questions in two or three complete sentences. Write your answers inside the
box provided below
1. How do you differentiate each form of business organization from one another? Can you give one
advantage and one disadvantage of each form of business organization?
To differentiate these four forms, sole proprietorship is most suitable for small scale concerns, the principle followed in a cooperative
society is one man, one vote, partnership has unlimited liability, corporation is about the expended business operations initiated by
the industrial revolution required increasingly large amounts of money to build factories and such.
ADVANTAGES AND DISADVANTAGES:
1. Sole Proprietorship: a.) The business is easy to dissolve, if desired. b.) in raising funds and are often limited to using funds from personal savings or
consumer loans.
2. Partnership: a.) More capital available b.) End to total independence.
3. Cooperative: a.) Less taxation b.) Lack of membership and participation
4. Corporation: a.) Limited liability b.) Tendency to institutionalize bureaucracy

2. Integration No. 4 (Faith/ Biblical Reflection: Proverbs 16:18). How will you relate the bible
verse with the lesson discussed on the forms of business organization: “Pride goes before
destruction, a haughty spirit before a fall”?

This goes together with the idea that humble people will be rewarded in
heaven. This describes that providing needs either will benefit by
yourself or to others, can results to prevention of problems.

3. If you were to choose from the four (4) basic forms of business organization, which do you think is the best
form of organization to operate for your business? Why?

The best form of business organization that will surely benefit to

my business is the partnership. More ideas, more profitable and
marketable will the goods and services be produce.

Short Essay Rubric:

Standard Excellent Very Good Good Fair
Content shows connection of the concept and explains sensible 5 4 3 2
decision about the topic that can help achieve the goal.

SUMMARY

In this lesson, you learned the different forms of business organizations You also learned the meaning,
description of each components and structures of the Statement of Changes in Equity and Cash Flow
Statement. Lastly, you are expected to prepare a Statement of Changes in Equity and Cash Flow
Statement of a single proprietorship business.

Analysis & Interpretation of Financial Statements / SCE & CFS Page 7 of 9 11

 ASSESSMENT

Direction:
A. From the information given, which was taken from the records of Gracias Consultancy Services,
prepare a statement of changes in owner’s equity for the year ended December 31, 2019.
G, Capital P 400,000
G, Drawing 40,000
The company generated a P150,000 net income. Gracia made an additional investment of P80,000.

GRACIAS CONSULTANCY SERVICES

Statement of Changes in Equity
For the year ended December 31, 2018

G, Capital P
Add; Additional Investment P
Net Income ____________ ________________
Sub-Total P
Less: Drawings ________________
Total Owner’s Equity P
==============

B. Using the same information from Assessment A, except that, instead of a net income, the company
incurred a net loss of P 55,000. Complete the statement of owner’s equity of Gracias Consultancy
Services.

GRACIAS CONSULTANCY SERVICES

Statement of Changes in Equity
For the year ended December 31, 2018

G, Capital P
Add; Additional Investment ________________
Sub-Total P
Less: Drawings P
Net Loss _____________ ________________
Total Owner’s Equity P
==============

Analysis & Interpretation of Financial Statements / SCE & CFS Page 8 of 9

11
 EXIT INSTRUCTIONS

Answer activities with all honesty and sincerity. Check your answer on the lesson’s knowledge check, activities
1 to 5 and the assessment part to ensure that all blanks have been answered. Make sure that you do not leave any
blank space unanswered. Please do not forget to write your name and the date of submission of your answer
sheets.

The entire module should be submitted back to the teacher before getting the next module.

SUPPORTING REFERENCES

Ong, Flocer Lao., Fundamentals of Accounting, Textbook for Beginners, Second Edition, 2008, pages
7-31
Valencia, Edwin G., Basic Accounting, 2002, pages 34-35

Accounting-simplified.com>financial statements

FEEDBACK
FEEDBACK

Write your comments and suggestions, if any, inside this box.

Analysis & Interpretation of Financial Statements / SCE & CFS Page 9 of 9

11