12

FUNDAMENTALS
OF
ACCOUNTANCY,
BUSINESS AND
MANAGEMENT 2
Module 5:

Cash Flow
Statement
1
FUNDAMENTALS
OF
ACCOUNTANCY,
BUSINESS AND
MANAGEMENT 2
Module 5:
Cash Flow
Statement
 12

Fundamentals of
Acccountancy,
Business and
Management 2
Module 5:
Cash Flow Statement
SELF-LEARNING MODULE
Introductory Message
For the facilitator:

Welcome to the Fundamentals of Accountancy, Business and Management 2

Grade 12 Self-Learning Module (SLM) on Cash Flow Statement.

This module was collaboratively designed, developed and reviewed by educators

both from public and private institutions to assist you, the teacher or facilitator in
helping the learners meet the standards set by the K to 12 Curriculum while
overcoming their personal, social, and economic constraints in schooling.

This learning resource hopes to engage the learners into guided and independent
learning activities at their own pace and time. Furthermore, this also aims to help
learners acquire the needed 21st century skills while taking into consideration their
needs and circumstances.

In addition to the material in the main text, you will also see this box in the body of
the module:

Notes to the Teacher

This contains helpful tips or strategies that will help you in guiding the learners.

As a facilitator you are expected to orient the learners on how to use this module.
You also need to keep track of the learners' progress while allowing them to manage
their own learning. Furthermore, you are expected to encourage and assist the
learners as they do the tasks included in the module.

6
 For the learner:

Welcome to the Fundamentals of Accountancy, Business and Management 2-

Grade 12 Self-Learning Module (SLM) on Cash Flow Statement.

The hand is one of the most symbolized part of the human body. It is often used to
depict skill, action and purpose. Through our hands we may learn, create and
accomplish. Hence, the hand in this learning resource signifies that you as a learner
is capable and empowered to successfully achieve the relevant competencies and
skills at your own pace and time. Your academic success lies in your own hands!

This module was designed to provide you with fun and meaningful opportunities for
guided and independent learning at your own pace and time. You will be enabled to
process the contents of the learning resource while being an active learner.

This module has the following parts and corresponding icons:

This will give you an idea

What of the
I Need skills or competencies you are expected to learn in the
to Know
module.
This part includes an activity that aims to check what you already know about the lesson to
take. If you get all theWhat
answers correct (100%), you may decide to skip this module.
I Know
This is a brief drill or review to help you link the current lesson with the previous one.
In this portion, the new lesson will be introduced to you in various ways such as a story, a
song, a poem, a problem opener, an activity or a situation.
What’s In
This section provides a brief discussion of the lesson. This aims to help you discover and
understand new concepts and skills.
What’s New
Whatfor
This comprises activities is Itindependent practice to solidify your understanding and skills of
the topic. You may check
What’sthe
Moreanswers to the exercises using the Answer Key at the end of the
module.
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learned from the lesson.
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an activity which will help you transfer your new knowledge or skill into
real life situations or What
concerns.
I Can Do
This is a task which aims to evaluate your level of mastery in achieving the learning
Assessment
competency.
In this portion, another activity will be given to you to enrich your knowledge or skill of the
lesson learned. This also tendsActivities
Additional retention of learned concepts.
This contains answers to all activities in the module.

Answer Key

References This is a list of all sources used in developing

this module.
The following are some reminders in using this module:

1. Use the module with care. Do not put unnecessary mark/s on any part of the
module. Use a separate sheet of paper in answering the exercises.
2. Don’t forget to answer What I Know before moving on to the other activities
included in the module.
3. Read the instruction carefully before doing each task.
4. Observe honesty and integrity in doing the tasks and checking your answers.
5. Finish the task at hand before proceeding to the next.
6. Return this module to your teacher/facilitator once you are through with it.
If you encounter any difficulty in answering the tasks in this module, do not
hesitate to consult your teacher or facilitator. Always bear in mind that you are
not alone.

We hope that through this material, you will experience meaningful learning and
gain deep understanding of the relevant competencies. You can do it!
 What I Need to Know

This module was designed and written with you in mind. It is here to help you
master the Cash Flow Statement. The scope of this module permits it to be used in
many different learning situations. The language used recognizes the diverse
vocabulary level of students. The lessons are arranged to follow the standard
sequence of the course. But the order in which you read them can be changed to
correspond with the textbook you are now using.

In this modulen, you are expected to: Discuss the components and structures of
cash flow statement (ABM_FABM 12-f-10).

After going through this module, you are expected to:

1. prepare a cash flow statement

What I Know

Now let me refresh your memories about your past lessons by watching these video
tutorials. (https://www.youtube.com/watch?v=PGFSZuJI27s
https://www.youtube.com/watch?v=LqYW-7UhO64).

However, for those of you who don’t have access to internet, here are some
examples of the previous lessons.

Statement of Financial Position

Angel Service Company

Statement of Financial Position
As of December 31, 2019
Account Format
Assets Amount Liabilities Amount

Current Assets: Current Liabilities

Accounts Payable-
Cash on hand and in banks P Trade P 850,000
52,000
Accounts
Payable-others 330,000
590,000
 Accounts Receivable (net of
P15,000 a allowance for bad
debts)
Notes Receivable Taxes/SSS/HDMF 20,000
100,000 Payable
Unused supplies P 1,200,000
38,000
Non - Current
Prepaid Expenses Liabilities
43,000
Total Current Assets Loan Payable 138,000
823,000
Total Liabilities P 1,338.000
Noncurrent Assets
Owner’s Equity
Equipment
2,800,000
Less: Accumulated Angel Reyes,
Depreciation Capital
150,000 2,135,000
Net Equipment 2,650,000
Total Assets P3,473,000 Total Liabilities & OE P3,473,000

Income Statement

Karel Trading Company

Income Statement
For the year Ended December 31, 2019
(Merchandising Concern Business)
Sales P 8,875,000
Less: Sales Discount P 16,000
Sales returns &
allowances 101,000 117,000
Net Sales
8,758,000
Less: Cost of Sales
Merchandise Inventory, Jan 1 P
728,000
Add: Purchases P4,125,000
Less: Purchase returns & P118,000
allow
Discounts 115,000
233,000

3,892,000
Add: Freight in
206,000 4,098,000
Total Goods Available for sale
4,826,000
Less: Merchandise 4,016,000
Inventory,12/31 810,000
Gross Profit 4,742,000
Less: Selling & Admin Expense
 Salaries Expense 1,218,000
Rent Expense 600,000
Utilities Expense 840,000
Bad debts Expense 116,000
Depreciation Expense 50,000
Transportation Expense 360,000
Insurance Expense 60,000
Supplies Expense 240,000
Taxes Expense 180,000 3,664,000
Net Income P1,078,000

Statement of Changes in Equity

Karel Trading Company

Statement of Changes in Equity
For the year Ended December 31, 2019

Karel Templo, capital January 1, 2019 P 900,000

Add: Net income for 2019 P 1,078,000
Additional Investment 200,000 1,278,000
Sub Total 2,178,000
Less: Withdrawals by Proprietor 80,000
Karel Templo, Capital December 31, 2019 P2,098,000

Note: On Dec 31, 2019 this shall be the statement of

Financial Position of Karel Templo Capital P2,098,000

Let’s answer this!

Instruction: Read each sentence carefully and determine whether the statement is
True or False. Write your answer on the space provided before the
number. However, questions 11-15 is a multiple choice test. Encircle the
letter of the correct answer.

1. The SFP provides readers with the information as to the company’s

financial position as of a specified date.
2. Asset = Liabilities + Owner’s Equity is the governing equation of the
SFP.
3. Asset is an element of the SFP that has a normal credit balance.
4, Debit means to increase an account.
5. T-account is a representation of the general ledger account used in
teaching accounting.
6. An entry on the opposite side of the normal balance of an account
means to decrease the account by the amount entered.
7. The normal balance of liabilities and equity is credit.
8. Credit means to decrease an account.
9. The normal balance of Notes Receivable is debit.
10. The normal balance of unearned income is debit.
11. Which of the following financial statements reflect the financial condition of the
company as of given date?
a. income statement c. statement of changes in equity
b. balance sheet d. cash flow statement

12. Which of the following financial statements reflect the operating performance
of the company?
a. income statement c. statement of changes in equity
b. balance sheet d. cash flow statement

13. Which of the following financial statements contain real or permanent

accounts?
a. income statement c. statement of changes in equity
b. balance sheet d. cash flow statement

14. Which of the following financial statements are to be closed to zero every end of
the period.
a. income statement c. statement of changes in equity
b. balance sheet d. cash flow statement

15.Which of the following financial statements provides information about the

changes in cash for a specified period?
a. income statement c. statement of changes in equity
b. balance sheet d. cash flow statement

Lesson

5 Cash Flow Statement

In the previous lesson, we learned the three basic financial statements which are
Balance Sheet, Income Statement and Statement of Changes in Equity. In this
module, you are required to discuss the components and structure of a Cash
Flow Statement and eventually prepare a Cash Flow Statement. Here we go……

What’s In

Let’s review what we learned!

Cash is the first line item in the balance sheet under current asset classification. It
is readily available to finance the current business operations. It has a normal
DEBIT balance.
The illustrations below are common cash transactions that would affect its value to
increase (sources) or decrease (uses) under normal business operation. Figures 1
and 2 are all assumed amount presented in a journal entry format.

CASH

CASH INFLOWS CASH OUTFLOWS

(Sources of Funds) (Uses of Funds)
1. cash receipts from owners 1. cash paid for acquisition of Plant
equipment
2. cash receipts from bank loan 2. cash paid to suppliers
3. cash receipts from sale of 3. cash paid for bank loans
company assets
4. cash receipts from collection of 4. cash paid for owner’s personal drawing
customers accounts
5. cash receipts from sale of goods 5. cash paid for shareholder’s dividends
and services
6. cash receipts from royalties, fees, 6. cash paid for salaries and other operating
commision and other revenues expenses

Figure 1 (Sources of funds)

Journal Entry/
Transactions Particulars Debit Credit
1. Contribution or CASH Php100,000
investment from owners MR. COVEY,
CAPITAL 100,000
# investment
by owners
2. Proceeds from borrowings CASH 500,000
BANK LOAN
PAYABLE 500,000
# borrowed
money from
the bank

3. Sale of Assets CASH 1,000,000

LAND 900,000
GAIN ON SALE 100,000
#Sale of real
property
4. Collection from customers CASH 980,000
WITHIN the discount SALES
period DISCOUNT 20,000
ACCOUNT
RECEIVABLE 1,000,000
 #Collection of
Accounts
Receivable

5. Cash receipts from sale of CASH 100,000

goods SALES 100,000

#Cash sales
6. Cash receipts from royalties, CASH 50,000
commission and other
revenues COMMISSION 50,000
INCOME
#receipt of
commission

Figure 2 (Uses and application of funds)

 Transactions Journal Entry/ Debit Credit
Particulars
1. Purchase of Land LAND Php500,000
CASH 500,000
# Land
acquisition

2. Payment of salaries SALARIES 500,000

CASH 500,000
#Payment of
salaries

3. Payment of bank loan NOTES PAYABLE 900,000

INTEREST 100,000
EXPENSE
CASH 1,000000
#Payment of
bank loan

4. Personal Withdrawals COVEY, DRAWING 100,000

CASH 100,000
#Withdrawals
for personal use

5. Cash paid for shareholder’s DIVIDEND 50,000

dividends PAYABLE
CASH 50,000
#payment of
dividends

6. Cash paid for salaries and SALARIES 50,000

other operating expenses. CASH 50,000
#payment of
salaries

What’s New

Let’s begin our new lesson with an activity

Activity 1 “Let’s compute your Daily Allowance and Expense!”

Direction: In a one whole sheet of paper, list down your Monthly CASH Allowance
from your parents (this should be computed on a daily basis to be
multiplied by the number of days in a month). Write down also your
liabilities from your classmates and friends including your daily expenses
for food, transportation and all other expenses you had spent for a month.
Deduct your monthly liabilities and expenses from your allowance. Get
the difference and share it on with your classmates.
 Oh that’s great! Whatever amount you derived at, represents your daily allowance
and expense. Your allowance represents “sources of fund” while your expenses
and debts represent “uses of fund”. Combining all together in a T- account format
this is what your activity should be looked like.

MONTHLY ALLOWANCE AND EXPENSES

Cash Inflow (Sources) Cash Outflow (Uses)

Allowance for the month computed Liabilities and Expenses for the month
by (daily allowance multiplied by (Daily expenses multiplied by the
number of days in a month) number of days in a month plus your
liabilities

Before we proceed with our main topic, I have here processing questions for you
to answer. Write your answers on the space provided below;

1. How much amount you raised from your daily allowance and from your daily
expenses?
2. As a point of reference with our previous lessons, what does your allowance
and expense do represent?
3. What significant amount you came across after deducting expenses from your
allowance? Can you explain the importance of this figure to you as an ABM
student?
4. Discuss any significant inputs in this activity that connects your prior learning
with that of our current lesson?

Write your answers here!

1.

2.

3.
 4.

You’ve just shared your personal thoughts and experiences with the recent activity.
At this juncture you are now ready to explore Cash Flows.

What is It

In the previous lesson we learned so much about cash which is an important

element of Statement of Financial Position, its relationship to Income and Revenue
and so with the Statement of Changes in Equity. In this module we will discuss the
nature of cash as it plays a pivotal role in the preparation of a Cash Flow
Statement. So, take a leap and be ready because Cash Flow Statement is here on
next!

CASH FLOW STATEMENT DEFINED

Cash Flow Statement provides an analysis of inflows and/or outflows of cash

from/to operating, investing and financing activities (Deloitte Global Services
Limited, 2015). This statement shows cash transactions only as compared to SCI
which follows the accrual principle.

NOTA BENE: The CFS provides the net change in the cash balance of a company
for a period. This helps owners see if their revenues are actually translated to cash
collections or if they have enough cash inflows in order to pay any maturing
liabilities

WHAT ARE THE TWO APPROACHES IN PREPARING Cash Flow Statement?

The two approaches to preparing Cash Flow Statement are:

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

2. Indirect – The operating cash flow section of the CFS under the indirect method
will reconcile with 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).
 Both approach will yield the same amount of cash flows from Operating
activities. Investing and Financing sections of the CFS will yield the
same results under both approach.

WHAT ARE THE DIFFERENT PARTS OF CASH FLOW STATEMENT?

The five major different parts of Cash Flow Statement are;

1. 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).

2. Investing Activities – Cash transactions related to purchase or sale of non-

current assets (Deloitte Global Services Limited, 2015).

3. 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.

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

5. 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.

Below is an illustration of Direct Method of preparing cash flow statement.

Major activities were presented in bold fonts to remind you of their distinctive
classification. The first two syllables on the third row title part was written in bold
font to remind your attention about its importance.
 Example: DIRECT APPROACH

COVEY FUN LEARNING COMPANY

CASH FLOW STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 2019

Cash Flow from Operating Activities: Amount

Receipts from Customers P1,000,000

Payments to Suppliers and Employees ( 700,000)
A) Net Cash generated by Operating Activities P 300,000
Cash flows from Investing Activities

Purchases of Property and Equipment (P 150,000)

B) Net Cash used in Investing Activities) (P 150,000 )
Cash flows from Financing Activities

Long term loan from a bank P 300,000

Withdrawals by owner (P 80,000)
Additional Investment from the Owner P 100,000
C) Net Cash generated from Financing Activities P 320,000
Net Increase in cash and cash equivalents ( P 470,000
A+B+C)
Cash, January 1, 2019 P 100,000
Cash, December 31, 2019 P 570,000

EXAMPLE; INDIRECT APPROACH

COVEY FUN LEARNING COMPANY

CASH FLOW STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 2019

Cash flows from Operating Activities:

Amount
Net Income P 250,000

Add back: Depreciation 20,000

Loss on sale of property and 10,000

equipment
Total 280,000
( 40,000 )
(Increase)/Decrease in Trade and Other
Receivables - Net
Increase/(Decrease) in Trade and Other Payables 60,000
A) Net Cash generated by Operating Activities P 300,000

Cash flows from Investing Activities

Amount
Purchases of Property and Equipment (P 150,000)
 Proceeds from sale 30,000

B) Net Cash used in Investing Activities (P 120,000 )

Cash flows from Financing Activities

Long term loan from a bank P300,000

Additional investment from owner 100,000
Withdrawals by owner ( 80,000)
C) Net Cash Generated from Financing Activities P 320,000)
Net increase in cash and cash equivalents (A +B P 500,000
+C)
Cash, January 1, 2019 100,000
Cash, December 31, 2019 P600,000

Under Indirect approach, the operating activity starts with Net Income and
it will be adjusted with its non-cash items such as depreciation.

Any gain or loss accounts i.e. Loss on sale of equipment as the case maybe
and other adjustments of account under accrual concept of income and
expense recognition shall also be adjusted against net income. Take note that
whatever approach you are using you will still arrive at the same answer in
both approaches.

TIPS TO SOLVING CASH FLOW – INDIRECT APPROACH

Here are important notes for you to remember in solving indirect approach to
cash flow problems.

1. First part is operating activities

 Non-cash expenses are added back while non-cash revenues are deducted.
Gain/loss on sale of non-current assets are deducted/added back because
the cash transaction is recorded under investing activities.
 Changes in current assets and current liabilities are either added or deducted
Depending on whether they increased or decreased during the year.

Increase in current assets deducted to net income

 Accounts Receivable – increases revenue which increases net income but is

not a cash transaction
 Prepaid Expense – decreases cash but does not change the net income
 Decrease in current assets – added to net income
 Accounts Receivable – increases cash but does not change the net income
 Prepaid Expense – increases expenses which decreases net income but is not
a cash transaction

Decrease in current assets added to net income

Increase in current liabilities added to net

income
  Accounts Payable – increases expenses which decreases net income but is not
a cash transaction
 Unearned Income – increases cash but does not change the net income

Decrease in current liabilities deducted to net income

 Accounts Payable – decreases cash but does not change the net income
 Unearned Income – increases revenue which increases net income but is not
a cash transaction

2. Second part is investing activities

3. Third part is financing activities

Important Formula to REMEMBER- Indirect Approach

A. Receipts from customers – is 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
Debit Credit
Beg. 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

Debit Credit
Beginning Balance + Net
Payments Purchases + Salaries Expense
Ending Balance
Example:

Direction: From this T-account for cash, classify all activities as to operating,
investing and financing activities. I am guiding you through this
presentation for clarity and guidance.

Cash in Bank

Debit (Sources) Amount Credit ( Uses) Amount

1. Investment by owner P 900,000 2.Withdrawal by owner P 30,000

3. Net proceeds from loan 420,000 4.Purchase of
Transportation 700,000
Equipment
6. Merchandise returns 6,500 6. Purchases 200,000
7. Advance payment 35,000 8. Payment of account 176,400
9. Cash sales 140,000 10. Sales returns 8,000
11.Collection from 130,000 12. Freight in & Freight 8,920
customers out

13. Collection with discount 245,000 14. Various expenses

95,000
P1,876,500 P1,218,320
P 658,180 Cash balance, end

Step 1- Group all the debits (fund sources) and label it according to its activity.

Investment by owner Financing P 900,000

Net proceeds from loan Financing 420,000
Merchandise returns Operating 6,500
Advance payment Operating 35,000
Cash sales Operating 140,000
Collection from customers Operating 130,000
Collection with discount Operating 245,000
P 1,876,500

Step 2- Group all the credits (uses & applications) of funds according to activity.

Withdrawal by owner Financing P 30,000

Purchase of transportation equipment Investing
700,000
Purchases Operating
200,000
Payment of account Operating
176,400
Sales returns Operating
8,000
Payment of freight Operating
8,920
Payment of various expenses Operating
95,000
P 1,218,320
Step 3- Get the difference between our debit and credit in order to get our ending
cash balance. In this example our ending cash balance is P1,876,500-
1,218,320 = P658,180.

Step 4- Combined the debit (source) and the credit (use) of the same activity.
Indicate the negative sign ( ) for all uses or application of funds for that
activity.

Step 5- At this point you are now ready to prepare your cash flow statement.

Corona Super Mart

Statement of Cash Flow
For the month ended December 31, 2019

Cash Flows from Operating Activities

Merchandise returns 6,500
Advance payment 35,000
Cash sales 140,000
Collection from customers 130,000
Collection with discount 245,000
Purchases ( 200,000 )
Payment of account ( 176,400 )
Sales returns ( 8,000 )
Payment of freight ( 8,920 )
Payment of various expenses ( 95,000 )
Net cash provided from operating activities P 68,180
Cash Flows from Investing Activities
Purchase of transportation equipment ( 700,000)
Net cash used from investing activities ( 700,000)
Cash Flows from Financing Activities
Investment by owner 900,000
Net proceeds from loan 420,000
Withdrawal by owner ( 30,000 )
Net cash provided from Financing activities 1,290,000
Net increase in cash P 658,180
Add: Cash balance, beginning of the period 0
Cash balance at the end of the period P 658,180
 What’s More

Congratulations! You have just finished your drill in direct approach cash flow
statement. Similarly, we will have a brief review on our theories by answering the
quizzer below;

Let’s try this!

Activity 2. Guess What?

This test is intended to review pertinent concepts about preparing a
Cash Flow Statement.

Direction: Answer each problem independently. However, for questions 4 to 10

you need a separate sheet of paper for your answer/solution. (20
minutes)

1. Gain on sale of property and equipment is part of what activity in the

Cash Flow Statement

2. Changes in long term liabilities is part of what activity in the Cash

Flow Statement?

3. Net income is part of which Approach in preparing the Cash Flow

Statement?

4. The company presented the following in order to aid the accountant

in preparing the Cash Flow Statement:

Questions 5-10 are based on the given data below. (Prepare a Cash Flow Statement
using Indirect Approach.

a Net income Php200,000

b Depreciation expense 25,000
c Gain on sale of property and equipment 100,000
d Decrease in trade and other receivables 70,000
e Purchase of property and equipment 200,000
f Payment of loan from bank 150,000

_11. Compute for the cash generated/used in financing activities.

12. Based on the given problem, compute for the net change in cash for
the year.
13-15. If ending balance of cash account is P700,000, prepare the CFS
for the year.
Activity 3. “Let’s Classify”

Direction: Prepare a cash flow statement from the given test below. You are required
to pass your solution on problem solving cases. You may use a separate
sheet of paper for your answer. Good luck!

1. Identify which of the following transactions fall under operating, investing and
financing activities:

Answers
a. Cash received from customers
b. Cash paid to suppliers
c. Cash paid to employees
d. Cash paid to purchase equipment (company does
not sell equipment)

e. Cash received from sale of furniture (company’s

main line of business is not related to furniture)

f. Depreciation expense
g. Sale of goods on credit

h. Purchase of goods on credit

i. Cash received from getting a loan from a bank
j. Cash paid to owners

2. Juana’s sari-sari store had the following transactions during the year:

a. Purchase of goods for cash P 100,000

b. Sale of goods for cash 150,000
c. Paid utilities 30,000
d. Paid rent 10,000
e. Sold equipment for cash 100,000
f. Owner withdraws from investment 10,000

Required: Compute for the net cash flow generated by/used in operating
activities

3. Using the given information above, compute the net cash flow generated
by/used in investing activities.

4. Using the given information above, compute the net cash flow generated
by/used in financing activities.

5. Using the given information above, prepare a Cash Flow Statement of Juana
as of December 31, 2019

Alright you have been surpassing with most of your test drills. I think you are
now ready to take onto the next level. Come on let’s go!
 What I Have Learned

Let’s sum it up!

Now, let’s remember that…

Cash Flow Statement provides the net change in cash balance of a company for
a given period.

It presents an analysis of inflows and/or outflows of cash from/to operating,

investing and financing activities (Deloitte Global Services Limited, 2015). This
statement shows cash transactions only as compared to SCI which follows the
accrual principle

Now, let us summarize our lesson from the very start by answering the following
questions below.

Activity 4 ‘Let’s face it!”

Direction: This is an Independent Practice test. On the fourth column you will
answer whether an account given is increasing or decreasing. Your
baseline year is 2018. On the fifth column you classify every account as to
operating, investing and financing activity.

Social Distancing Company

Statement of Financial Position
December 31, 2019
IN THOUSANDS

Increase
2019 2018 (Decrease) Activity
Cash P 160 P 340
Account Receivable 430 390
Allowance for Bad Debts ( 10) ( 15)
Merchandise Inventory 500 540
Land 2,100 2,000
Equipment 1,300 1,100

Allowance for Depreciation ( 380) ( 300)

Prepaid Expenses 70 75
Total Assets P 4,170) P 4,130

Accounts Payable P 2,150 P 2,080

Adal, Capital 2,100 2,000
Adal, Drawings ( 250) ( 180)
Net Income 170 230
Total Liabilities & Net P 4,170 P 4,130
Worth
Activity 5: Let’s apply what you learned!

Direction: True or False. Read each sentence carefully and determine whether the
statement is True or False. Write your answer on the space provided
before each number.

1. The statement of Cash Flows show the amount of cash received and
used in the business organized according to operating, investing, and
financing activities
2. Cash payment for bank loans are reported under cash flows from
operating activities.
3. If the company has no accounts receivable balance at the beginning and
at the end of the year, then net sales reported in the Statement of
Comprehensive Income will most likely be equal to the cash received
from customer reported in the Statement of Cash Flows.
4. Payments for the acquisition of merchandise inventory are reported as
investing activities.
5. Statement of Cash Flows explains the observed difference in the cash
balance from the beginning to the end of the period.
6. Business activities are classified into operating, investing and funding
activities in the Statement of Cash Flows.
7. Salaries and utility payment are reported as operating activities.
8. Non-Cash expenses such as depreciation and amortization are
deducted from net income to arrive at the cash flows from operating
activities.
9. A negative cash flow from investing activities is a bad indicator of the
company’s ability to generate cash.
10. The bottom line of the SCF is equivalent to the cash balance presented
in the Statement of Financial Position.

Activity 6: Let’s classify it!

Direction: From the line items in the box, prepare a pro forma statement of cash
flows. Classify the line items as to operating, investing, and financing
activities. Indicate whether an activity is a plus or minus

Cash received from customers Salaries paid

Interest paid Utilities paid
Cash drawings of owners Payment for the acquisition of
equipment
Cash contributions from owners Depreciation
Payment to suppliers Amortization
Principal payments for bank Cash received from sale of land
loans
Pro Forma Cash Flow Statement
Operating

Investing
 Financing

What I Can Do

Let’s do it!
Activity 7. “Solve me!”

Now, it’s time for you to apply what you have learned from your lesson about CASH
FLOW STATEMENT. Are you now ready? Then, let’s begin!

Direction: Given the data below, you are to prepare a Cash Flow Statement of
Covey19 Corporation highlighting its operating, investing and financing
activities. You prove that Covey 19 Corp cash balance is being reconciled
with its cash balance at the end of the period. Use an 8 column
worksheet for your answers and solutions. Staple and attach your
answer to the module.

Covey 19 Corporation
The cash account of Covey 19 has a beginning balance of P129,937.50. Its year-
end balance stands at P254,925. The table below show the summarized
transactions from the account of Covey19 Company. (60 minutes)

Cash received from customers P 725,175.00

Payments to suppliers 300,547.50
Payments for other operating expenses 58,850.00
Salaries paid 19,992.50
Purchase of Equipment 253,000.00
Sale of delivery Equipment 6,875.00
Proceeds from sale of computer equipment 42,762.50
Withdrawals of owners 229,350.00
Proceeds from bank loan 82,500.00
Contribution of owners 137,500.00
Interest paid 8,085.00
The information on the table below are taken from the financial statements of Covey
19 Corporation. Based on these information, compute for the amount of cash that
the company had received from the customers. Does your answer tie up with the
summarized data from the cash account given in the table in Problem 1? Yes or No
then, show your solution

Account Receivable beginning of the year P

156,750.00
Account Receivable end of the year
249,700.00
 Sales
818,125.00

Assessment

Let’s find out!

Kudos! You have done this far…. Let’s see what’s in store for you with our lesson at
hand. Now, I want you to read the instruction carefully and answer what is being
asked?

Activity 8. “Classify me”

Direction: On the space provided, indicate whether the items are categorized as
operating, financing and investing activity. Use + (plus sign) if the item
represents cash inflows and – (minus sign) if it represents cash outflows.

Item Operating Financing Investing

1. Cash paid for insurance
2. Cash paid for by withdrawal by
owner
3. Cash received from bank loan
4. Cash paid for purchase of truck
5. Cash received from sale of
equipment
6. Cash received from rental
7. Cash received from investment by
owner
8. Cash received from cash sales
9. Cash collected from customers
10. Cash paid for interest on loans

Activity 9. “More to solve!”

Direction: Shown below is the general ledger of cash account broken down as
follows; Prepare a Statement of Cash Flows for the year ended. Cash
Balance beginning January 1, 2018 is P60,0000. Use a separate
worksheet for your answer.

Cash Debits (Sources) Amount

Investment by owner P 200,000
Cash received from service rendered 100,000
Proceeds from bank loan 150,000
Collection from customers account 75,000
Proceeds from sale of an old truck 65,000
P 590,000
Cash Credits (Uses)
Payment of rental P 80,000
Purchase of new equipment 125,000
Payment of utilities expenses 110,000
Withdrawal by owner 50,000
 Payment of taxes and licenses 12,000
P 377,000

Additional Activities

Let’s do this at home!

Congratulations! You made it until the end of our lesson. I know you’ve learned so
much about Cash Flows. Now, for your additional activities, do this tasks at home.

Direction: Determine the net cash flow from operating, investing and financing
activities for the year ended December 31, 2019

The differences in Bell Company’s statement of financial position on December 31,

2019 and 2018 are:
Increase
(Decrease)

Cash and cash equivalents P 270,000

Short term investments 200,000
Accounts Receivable, net of allowance ( 20,000
)
Inventory 100,000
Noncurrent investments ( 100,000
)
Property Plant and equipment 700,000
Accumulated Depreciation ( 50,000)
1,100,000
Accounts payable ( 5,000)
Dividends payable 160,000
Short term debt 300,000
Long term debt 130,000
Share capital, P10 par 150,000
Share premium 75,000
Retained earnings 290,000
1,100,000

Additional information relating to 2019;

1. Net income was P790,000
2. Cash dividends of P500,000 were declared
3. Equipment costing P600,000 and having a carrying amount of P350,000
was sold for
P350,000
4. A non-current investment was sold for P90,000.
Answer Key