Department of Education

SCHOOLS DIVISION OF CITY OF MEYCAUAYAN

Pag-asa St., Malhacan, City of Meycauayan, Bulacan

Senior High School

Activity Sheet 12
in
Fundamentals of
Accountancy, Business
and Management 2
Statement of Cashflow
ABM_FABM12-If10 & ABM_FABM12-If11
 STATEMENT OF CASH FLOW

LET US KNOW

From Michelle Cagans’ book Accounting 101 she mentioned that cash are the
most complicated of the standard financial reports prepared at the end of every
accounting period. The ending cash balance is always equal to the current cash
amount reported in the balance sheet. In this activity sheet, we will practice the
skill of preparing statement of cashflow and learned it significance in managing
our business operation.

LET US REVIEW

Copy and complete the sandwich chart below and recall the
important details we learned from our previous lesson Statement of Changes in
Equity financial statement. Write your answer on a separate sheet of paper.

Statement of Changes in Equity

 LET US STUDY

Cash flow statement is under (PAS 7). The objective of the standard is to
require provision on the historical changes in cash and cash equivalents of an
entity by means of a cash flow statement which classifies cash flow during the
period from operating, investing and financing activities. The purpose of this
financial report is to provide users of financial statement with a basis to assess the
ability of an entity to generate cash and cash equivalent, and ability of a firm to
source out and utilized cash available within the firm. It is considered integral part
of an entity’s financial statement according to Roberto Palma author of Basic
Accounting 1, Sole Proprietorship. Cash flow is a conjunction with the rest of the
financial statement which evaluates the changes in net assets of an entity, its
financial structure and timing in adapting to the changes in business environment.

Definition of Terms :
 Cash comprises cash on hand and demand deposit.
 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 changes in value.
 Cash Inflow are inflows and outflows of cash and cash equivalents.
 Inflows of cash means cash is received by the company or there is an
increase in amount of cash account . Inflow of cash is also called cash
receipt .
 Outflow of cash means cash is paid by the company or there is a decrease
in the amount of cash account. Outflow of cash is also called cash
payment.
 Cash Flow Statement was originally called Statement of Sources and Use
of Cash.

Investing
Activities
Non-Current
Financing
Operating Activities
Activities Equity & Non-
Profit & Loss Current
Liability

Organization
Cash Related
Activities
Figure1. Three categories of cashflow activities

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Method of Cash Flow

Direct Method converts individual cash receipts and cash payment to cash
inflows(sources of cash) and cash outflow (usage of cash).

Indirect Method makes the necessary adjustment to net income to arrive at the
net cash flow from operating activities. The process necessitates the analysis of
changes in balance sheet accounts. Only cash flow from operating activities
uses indirect method. Cash flows from investing activities and financing activities
uses direct method.

Classification of Cash Flows

Examples
Cash flow from operating activities are  Cash receipts from sale of goods
the principal revenue-producing activities and rendering of service (+)
of the entity. This is essentially the  Cash receipts from royalties, fees,
conversion of income statement items to commission, and other revenue (+)
inflow and outflow of cash It involved  Cash payment to suppliers of goods
income statement account and current and services (-)
asset account except (short-term  Cash payment to employees(-)
investment such as trading securities or  Cash Payments to income taxes (-)
marketable securities) and current  Interest paid (-)
liabilities account and buy and sell of all  Interest received(+)
non-current assets.  Dividend Received (+)

Cash flow from investing activities are  Cash to acquire property, plant,
acquisition and disposal of long-term and equipment (-)
assets and short-term and long-term  Cash payments to acquire
investments and buy and sell of all intangible assets (-)
non- current assets.  Cash receipt from sale of property
plant and equipment (+)
 Cash receipts from sale of
intangible assets (+)
 Cash receipts from sale of long-term
assets (+)
Cash flow from financing activities are  Cash investment from owners (+)
activities that result in changes in the size  Cash proceeds from the bank loans
and composition of contributed and (+)
borrowing of entity. It involves all  Cash distribution to owners (-)
liabilities related to borrowings from  Repayment of loans (-)
financial institution and all accounts in
the equity section except net income
(included the operating activities).

Preparation of Statement of Cash flow

1. Heading consist of company name, title of the statement and the period covered
by the statement.

Espejo Law Office

Statement of Cash Flows
For the Period Ended December 31, 2019

2. Analyze transactions, classify whether the nature transactions are operating,

investing, or financing with a ₱ 250,000 beginning cash balance.

3. Prepare the Operating Activities Section.

CASH FLOW FROM OPERATING ACTIVITIES

Cash receipts from rendering of service ₱207,500.00
Cash payment to suppliers of goods and services -₱150,000.00
Net Cash flow from operating activities ₱57,500.00

4. Prepare the Investing Activities Section.

CASH FLOW FROM INVESTING ACTIVITIES

Purchase of office equipment -₱30,000.00
Net Cash flow used in investing Activities -₱30,000.00

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5. Prepare the Financing Activities Section.

CASH FLOW FROM FINANCING ACTIVITIES

Proceeds from cash investment of owners ₱1,500,000.00
Proceed from bank loans ₱100,000.00
Payment to owners -₱25,000.00
Net Cash Flow from Financing Activities ₱1,575,000.00

6. To compute for cash at the end of the period, add all the net cash flow
activities including the cash at the beginning of the period.

Espejo Law Office

Statement of Cash Flows
For the Period Ended December 31,2019

CASH FLOW FROM OPERATING ACTIVITIES

Cash receipts from rendering services ₱207,500.00
Cash Payment to suppliers of Goods and services -₱150,000.00
Net Cash flow from operating activities ₱57,500.00

CASH FLOW FROM INVESTING ACTIVITIES

Purvhase of Property, Plant and Equipment -₱30,000.00
Net Cash flow from Investing activities -₱30,000.00
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from cash investment of owners ₱1,500,000.00
Proceeds from bank loans ₱100,000.00
Payment to owners -₱25,000.00
Net Cash flow from financing activities ₱1,575,000.00

Net Increase in Cash ₱1,602,500.00

Cash at the beginning of the period ₱250,000.00
Cash at the end of the period ₱1,852,500.00

Note: “Cash at the end of the period” is linked to the reported cash and cash
equivalent to the Statement of Financial Position.
 LET US PRACTICE

I. Classify the business transactions listed below whether they are operating,
investing or financing activity in Statement of Cash Flow. Write your answer on
your notebook.

1. ___________________ Investment by owner

2. ___________________ Sale of Land
3. ___________________ Sale of Merchandise
4. ___________________ Purchase Equipment
5. ___________________ Purchase of raw materials inventory
6. ___________________ Payment of interest
7. ___________________ Payment of income tax
8. ___________________ Collection of receivables
9. ___________________ Purchase of Trademarks
10. ___________________ Proceeds on bank loan
11. __________________ Purchase of old Equipment
12. __________________ Proceeds from long-term debt
13. __________________ Payment acquisition of shares of stocks.
14. __________________ Receipt from service rendered
15. __________________ Cash withdrawal by the owner

LET US REMEMBER

Indirect Method

Current Assets
1. An increase in current asset (except cash account and marketable or
trading securities) is an Outflow.
2. A decrease in current assets (except cash account or marketable or
trading securities) is an Inflow.

Current Liabilities
1. An increase in current liabilities is an Inflow.
2. Decrease in current liabilities is an Outflow.

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Indirect Method is easier to prepare because it involves.
a. Non-cash expenses (such as depreciation ,depletion expense ,amortization
expense of intangible assets, amortization of premium bond investment,
amortization of discount on bond investment).
b. Changes in balances of each current assets and current liabilities account
except cash and current investments from last year to this year.

Cash at the end of the period” is linked to the reported cash and cash
equivalent to the Statement of Financial Position.

LET US APPRECIATE

Write an essay on the significance of Statement of Cash flow. Include in your

content the effect if an entity fails to prepare the report at the end of the accounting
period. Write your answer on separate sheet of paper.

RUBRICS

5 pts. Learner set a strong introduction, with organized thought and

complete information. Brief, but with substance.

4 pts. Learners present his thoughts with organization, however, it lacks

depth and used informal language.

3 pts. Attempt to present the details with organization. Uses informal

language and it was not neatly written.

2 pts. Shows limited understanding of the topic and learner failed to

establish the details with clarity.

1 pt. Failed to present insightful message. Lack organization and failed

to establish the details with clarity.
 LET US PRACTICE MORE

Below is the cash transaction of Sharmaine Esquilla, of Hardware &

Software Computer Service for December 31, 2019. Prepare the statement of Cash
flows using indirect method. Use the Microsoft Excel application in presenting your
answer.

Cash payment to suppliers of computer hardware

(-) ₱25,000.00
Cash receipts from rendering of services (+) ₱50,000.00
Payment to owners (-) ₱10,000.00
Proceeds from bank loans (+) ₱50,000.00
Proceeds from cash investment of owners (+) ₱100,000.00
Payment for acquisition of equipments (-) ₱120,000.00
Cash at the beginning of the year ₱1,000,000.00

Answer the following questions.

1. How much is the cashflow from operating activities?
2. How much is the cashflow from investing activities?
3. How much is the cashflow from financing activities?
4. How much is the net increase or decrease in cash for the year?
5. How much is the cash as of December 31, 2019?

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 EVALUATION

I. Choose the letter of the correct answer. Write your answer on a 12-column
worksheet.

1. Statement of Cash is under what Philippine Accounting Standard.

a. PAS 1 b. PAS 5 c. PAS 7 d. PAS 2
2. What is the effect in the cash account when a company bought merchandise
inventory?
a. an increase in current asset is an inflow of cash.
b an increase in current is an outflow of cash.
c. A decrease in current asset is an inflow of cash.
d. A decrease in current asset is an outflow of cash.
3. __________________ is an inflows and outflows of cash and cash equivalents.
a. Cash flow
b Cash inflow
c. Cash outflow
d. Statement of Cash Flow
4. ______________ is a cash paid by the company or there is a decrease in the
amount of cash account.
a. Cash flow b. Cash inflow c. Cash outflow d. Statement of Cash flow
5. Which of the following reason is not true about indirect method of Statement
of Cash Flow?
a. Non-cash expenses (such as depreciation, depletion expense ,amortization
expense of intangible assets, amortization of premium bond investment,
amortization of discount on bond investment).
b. Changes in balances of each current assets and current liabilities
account except cash and current investments from last year to this year.
c. It is not easy to prepare.
d. Both a and b

II. Preparation of Statement of Cash Flow

The cash account details below are from Gabayno’s Real Trading as of
December 31,2019.You are required to prepare the entity’s Statement of Cash flow.
Answer the following questions as you prepare the financial statement. Write your
answer on a 12-column worksheet .

1. How much is the cash flow from operating activities?

2. How much is the cash flow from investing activities ?
3. How much is the cash flow from financing activities ?
4. How much is the increase or decrease in cash for year?
5. How much is the cash as of December 31, 2019?
Cash payment to supplies goods and services (-) ₱25,000.00
Cash receipts from rendering of services (+) ₱50,000.00
Payment to owners (-) ₱5,000.00
Proceeds from bank loans (+) ₱25,000.00
Proceed from cash investment of owners (+) ₱115,000.00
Payment to income taxes (-) ₱12,000.00
Payment for interest (-) ₱12,500.00
Proceeds from dividend of investment (+) ₱15,000.00
Payment for acquisition of equipment (-) ₱100,000.00
Cash at the beginning of the year (+) ₱1,000,000.00

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 All Rights Reserved
2020

ACKNOWLEDGEMENT

CAROLINA S. VIOLETA, EdD

Schools Division Superintendent

JERRY D. CRUZ, PhD, CESE

Asst. Schools Division Superintendent

DOMINADOR M. CABRERA, PhD

Chief, Curriculum Implementation Division

EDWARD C. JIMENEZ, PhD

Education Program Supervisor- LR Manager

JOCELYN A. MANALAYSAY, PhD

Education Program Supervisor- Mathematics

CHARMAINE S. TUMANGAN
Developer- Meycauayan National High School