Additional Examples

Sample Cash Flow Statement

LEARNING IS FUN COMPANY
CASH FLOW STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 2016

Cash flows from Operating Activities

Receipts from Customers P 1,000,000

Payments to Suppliers and Employees (700,000)

Net Cash generated by Operating Activities P 300,000

Cash flows from Investing Activities

Purchases of Property and Equipment (P 150,000)

Net Cash used in Investing Activities (P 150,000)

Cash flows from Financing Activities

Long term loan from a bank P 300,000

Additional investment from owner 100,000

Withdrawals by owner (80,000)

Net cash generated by Financing Activities P 320,000

Net increase in cash and cash equivalents P 470,000

Cash, January 1, 2016 100,000

Cash, December 31, 2016 P 580,000

a. Receipts from customers - derived from the following formula:

Ending Accounts Receivable = Beginning Accounts Receivable + Net Sales – Collections

Therefore: Collections (receipts from customers) = Beginning Accounts Receivable + Net Sales or
Net Revenue –Ending Accounts Receivable
 Accounts Receivable T-Account

Dr Cr

Beginning Balance + Net Sales Collections

Ending Balance

b. Payments to Suppliers and Employees – derived from the following formula:

Ending Accounts Payable and Ending Accrued Salaries Expense = Beginning Accounts Payable +
Beginning Accrued Salaries Expense + Net Purchases + Salaries Expense - Payments

Therefore: Payments = Beginning Accounts Payable + Beginning Accrued Salaries Expense + Net
Purchases + Salaries Expense – Payments

Accounts Payable T-Account

Dr Cr

Payments Beginning Balance + Net

Purchases + Salaries
Expense
Ending Balance

Differentiate the Direct and Indirect Approach of the CFS

Direct – The operating cash flow section of the CFS under the direct method would show each
major class of gross cash receipts and gross cash payments (Deloitte Global Services Limited,
2015).

Indirect – The operating cash flow section of the CFS under the indirect method will reconcile the
net income/loss of the company with the total cash flows generated/used in operating activities by
adjusting the net income/loss for effects of non-cash transactions (Deloitte Global Services Limited,
2015).

Emphasize that the two are only approaches and will yield the same amount of cash flow from
 operating activities. Note that the Investing and Financing sections of the CFS are the same under the two approaches.

Point out different parts of the Cash Flow Statement

Operating Activities – Activities that are directly related to the main revenue-producing activities of the company such as cash from
customers and cash paid to suppliers/employees (Deloitte Global Services Limited, 2015).

Investing Activities – Cash transactions related to purchase or sale of non-current assets (Deloitte Global Services Limited, 2015).

Financing Activities – Cash transactions related to changes in equity and borrowings.

Net change in cash or net cash flow (increase/decrease) – The net amount of change in cash whether it is an increase or decrease for
the current period. The total change brought by operating, investing and financing activities.

Beginning Cash Balance – The balance of the cash account at the beginning of the accounting period.

Ending Cash Balance – The balance of the cash account at the end of the accounting period computed using the beginning balance plus
the net change in cash for the current period.

LEARNING IS FUN COMPANY

CASH FLOW STATEMENT HEADING
FOR THE YEAR ENDED DECEMBER 31, 2016

OPERATING ACTIVITIES
Cash flows from Operating Activities
P 1,000,000
Receipts from Customers
(700,000)
Payments to Suppliers and Employees
P 300,000
Net Cash generated by Operating Activities
Cash flows from Investing Activities INVESTING ACTIVITIES
Purchases of Property and Equipment (P 150,000)

Net Cash used in Investing Activities (P 150,000)

 c. Heading FINANCING
ACTIVITIES
Cash flows from Financing Activities Long P 300,000
term loan from a bank Additional investment
from owner Withdrawals by owner 100,000
Net cash generated by Financing Activities
(80,000)

P 320,000

Net increase in cash and cash P 470,000

equivalents Cash, January 1, 2016 100,000

Cash, December 31, 2016 P 580,000

i. Name of the Company

ii. Name of the Statement
iii. Date of preparation (emphasis on the wording – “for Cash Balance Beginning + Collections –
the”) Payments = Cash Balance Ending
d. Sample of the Direct Method
Where: Collections = Beginning Trade and
i. First part is operating activities
Other Receivables + Net Sales or Net
ii. Second part is investing activities Revenues – Ending Trade and Other
iii. Third part is financing activities Receivables
LEARNING IS FUN COMPANY
CASH FLOW STATEMENT HEADING Where: Net Sales or Net Revenues
FOR THE YEAR ENDED DECEMBER 31, 2016 is already included in the Net
Income
Cash flows from Operating Activities TIVITIES
OPERATING AC
Thus: Collections = Beginning Trade and
Net Income P 250,000
Other Receivables – Ending Trade and
Add back: Depreciation 20,000 Other Receivables

Loss on sale of property and equipment 10,000

P 280,000

(Increase)/Decrease in Trade and Other Receivables - Net (40,000)

Increase/(Decrease) in Trade and Other Payables 60,000

Net cash generated by Operating Activities P 300,000

 Cash flows from Investing Activities INVESTING ACTIVITIES Beginning Trade and Other Receivables –
(P 150,000) Ending Trade and Other Receivables =
Purchases of Property and Equipment Increase/Decrease in Trade and Other
30.000 Receivables – Net

(P 120,000) A positive result means beginning is greater

than ending and there is a decrease in the
Cash flows from Financing Activities FINANCING ACTIVITIES balance of the receivables because of the
cash collections while a negative result
Long term loan from a bank p 300,000 means ending is greater than beginning and
there is an increase in the balance of the
Additional investment from owner 100,000 receivables because of more sales on
account.
Withdrawals by owner (80,00)
Where: Payments = Beginning Trade and
Net cash generated by Financing Activities P 320,000
Other Payables + Expenses – Ending Trade
Net increase in cash and cash equivalents P 500,000 and Other Payables

Cash, January 1, 2016 100,000 Where: Expenses is already included in the

Net Income
Cash, December 31, 2016 P 600,000
Thus: Payments = Beginning Trade and
Other Payables – Ending Trade and Other
Payables
e. Sample of the Indirect Method
Beginning Trade and Other Payables –
c.i. First part is operating activities
Ending Trade and Other Payables =
c.i.i. Non-cash expenses are added back while non-cash revenues are deducted. Gain/loss Increase/Decrease in Trade and Other
on sale of non-current assets are deducted/added back because the cash transaction is Payables
recorded under investing activities.
A positive result means beginning is greater
c.i.ii. Changes in current assets and current liabilities are either added or
than ending and there is a decrease in the
deducted depending on whether they increased or decreased during the balance of the payables because of the cash
year. payments while a negative result means
Increase in current assets – deducted to net income ending is greater than beginning and there
is an increase in the balance of the
Accounts Receivable – increases revenue which increases net income but is not a
payables because of more expenses on
cash transaction account.
Prepaid Expense – decreases cash but does not change the net income
Examples:

1. The company presented the following in order to aid the accountant in preparing the CFS:
a. Net income: P200,000
b. Depreciation expense: P 25,000
c. Gain on sale of property and equipment: P100,000
d. Decrease in trade and other receivables: P 70,000
e. Purchase of property and equipment: P200,000
f. Payment of loan from bank: P150,000
Compute for the cash generated/used in financing activities.
Answer: P150,000 net cash used in financing activities

Based on the given above, compute for the net change in cash for the year.
Answer:: (P155,000) net change in cash

If ending balance of cash account is P700,000, prepare the CFS for the year.
Answer:

NAME OF COMPANY
CASH FLOW STATEMENT
FOR THE YEAR ENDED (YEAR-END)

Cash flows from Operating Activities

Net income P 200,000.00

Add back:

Depreciation Expense 25,000.00

Less:

Gain on sale of property and equipment (100,000)

125,000.00

Decrease in trade and other receivables-net 70,000.00

Net cash flow generated from operating activities P

195,000.00 Cash flow from investing activity

Purchase of property and equipment (P 200,000.00)

Net cash flow generated from investing activity (P 200,000.00)

Cash flow from financing activity

Paid loan from a bank (P 150,000.00)

Net cash flow from used in financing activity (P 150,000.00)

Net change in cash (P 155,000.00)

Cash, Beginning 855,000.00

Cash, Ending P 700,000.00

.Juana’s sari-sari store had the following transactions during the year:
a. Purchase of goods. Paid cash. 100,000
b. Sale of goods. Received cash. 150,000
c. Paid utilities 30,000
d. Paid rent 10,000
e. Sold equipment for cash 100,000
f. Owner withdraws investment 10,000
Compute for the net cash flow generated by/used in operating activities
Answer:P10,000 generated by operating activities (Topic: Operating Activities)

Using the given above, compute for the net cash flow generated by/used in investing activities.
Answer: P100,000 generated by investing activities (Topic: Investing Activities)

Using the given above, compute for the net cash flow generated by/used in financing activities.
Answer: P10,000 used in financing activities (Topic: Investing Activities)
Using the given above, prepare a Cash Flow Statement.
Answer: (Topic: Statement Preparation - Direct)
 JUANA’S SAI-SARI STORE
CASH FLOW STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 2016

Cash flows from Operating Activities

Sale of goods P 150,000.00

Purchase of goods (100,000.00)

Paid utilities (30,000.00)

Paid rent (10,000.00)

Net Cash generated by Operating Activities P 10,000.00

Cash flows from Investing Activities

Sold equipment P 100,000.00

Cash flow generated from investing activity P 100,000.00

Cash flows from Financing Activities

Withdrawals by owner (P 10,000.00)

Cash flow from used in Financing Activities (P 10,000.00)

Net change in cash P 100,000.00

Cash, January 1, 2016 50,000.00

Cash, December 31, 2016 P 150,000.00

1. Prepare the Cash Flow Statement of JunJun’s Delivery Services using the following:
Increase in trade and other payables 150,000
Net Income 500,000
Amount of proceeds from sale of property 50,000
Depreciation expense 70,000
and equipment
Gain on sale of property and equipment 10,000
Paid loan from a bank 100,000
Increase in trade and other receivables – net 250,000
Cash, January 1, 2016 70,000
Answer: (Topic: Statement Preparation - Indirect)

JUNJUN’S DELIVERY SERVICES

CASH FLOW STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 2016

Cash flows from Operating Activities

Net Income P 500,000.00

Add back: Depreciation Expense 70,000.00

Less: Gain on sale of property and quipment (10,000.00)

P 560,000.00

(Increase)in Trade and Other Receivables - Net (250,000.00)

Increase in Trade and Other Payables 150,000.00

Net cash generated by Operating Activities P

460,000.00 Cash flow from investing activity

Proceeds from sale of property and equipment P

50,000.00 Net cash flow generated from investing activity P

50,000.00 Cash flow from financing activity

Paid loan from a bank P 100,000.00

Net cash flow from used in financing activity P 100,000.00

Net change in cash P 610,000.00

Cash, January 1, 2016 70,000.00

Cash, December 31, 2016 P 680,000.00