Raym Jerald Felix

ACCTNG 025

1. Describe the statement of cash flows and enumerate the three classifications.
Statement of clash flow is a financial statement that shows the flow or movement
of the cash and cash equivalents that’s going in and out of the company. This will
measure how effective and good the company is, in managing their cash position. It is a
part of the complete set of financial statement that a company has to prepare and present.
This will show help in analyzing the changes in cash and cash equivalents during the
period.
Statement of cash flow has three classifications namely the operating activities,
investing activities, and financing activities.
Operating activities rooted from the revenue generating activities; Investing
activities focuses on the long-term assets and investments; and financing activities are
usually the activities that a company undertakes which affects the equity and long-term
liabilities.
2. Explain the component of method of presentation of operating cash flows, investing
cash flows and financing cash flows.
Operating activities are the transactions from the revenue generating activities
which can be computed though indirect and direct method. In indirect method, the profit
or loss is adjusted by the effects of the non-cash transactions, hence, the increase and
decrease of some accounts are observed. In direct method, it focuses more on the sources
of cash receipts and expenses, thus, it uses the actual cash outflow or inflow from the
operations. On the other hand, investing activities are the transactions from acquiring or
disposing long-terms assets and other investments, whereas, financing activities are the
transactions that focuses on funding the company, raising the capital or paying the
creditor or investors, and the like. The two can use direct method. It doesn’t matter what
method because both indirect and direct will result to the same figures. Hence, both
would be identical under any of the two methods.

DIRECT METHOD OF PRESENTATION FOR OPERATING ACTIVITIES

Cash Sales xxx
Collection of accounts and notes receivables xxx
Collection of interest xxx
Cash dividend from associate xxx
Cash proceeds from sale of trading securities xxx
Collection of royalty xxx
Collection of commission xxx
Proceeds from insurance xxx
Cash dividend from other investment xxx
Payment of accounts payable (xxx)
Payment of Salaries (xxx)
Payment of rent (xxx)
Payment of taxes (xxx)
Payment of trading securities (xxx)
Payment of royalty (xxx)
Payment of commission (xxx)
Payment of insurance (xxx)
Net cash provided by (or used in) operating activities xxx

INDIRECT METHOD OF PRESENTATION FOR OPERATING ACTIVITIES

Net income xxx
Add: Noncash expenses
Depreciation expense xxx
Amortization expense of intangible assets xxx
Impairment loss of PPE and intangible assets xxx
Less: Noncash income
Net share in profit associate xxx
Amortization of unearned interest income xxx
Add:
Amortization of discount on bonds payable xxx
Amortization of premium on investment in bonds xxx
Less:
Amortization of premium on bonds payable xxx
Amortization of discount on investment in bonds xxx
Add (or Deduct) Adjustments
Salaries expense for share-based payment xxx
Unrealized loss (or gain) on investment property using FV model xxx
Cash dividend from associate xxx
Decrease (or increase) in accounts receivable xxx
Decrease (or increase) in inventory xxx
Decrease (or increase) in prepayments xxx
Decrease (or increase) in trading securities xxx
Decrease (or increase) deferred tax assets xxx
Loss (or gain) on sale of FVTOCI income securities xxx
Loss (or gain) on sale of investment in associate xxx
Loss (or gain) on sale of land xxx
Loss (or gain) on sale of building xxx
Loss (or gain) on sale of equipment xxx
Loss (or gain) on sale of intangible asset xxx
Loss (or gain) on settlement of bond payable xxx
Increase (or Decrease) in accounts payable xxx
Increase (or Decrease) in notes payable-trade xxx
Increase (or Decrease) in accrued expenses xxx
Increase (or Decrease) in income tax payable xxx
Increase (or Decrease) in deferred tax payable xxx
Net cash provided by (or used in) operating income xxx
DIRECT METHOD OF PRESENTATION FOR INVESTING ACTIVITIES
Proceeds from sale of FV through OCI securities xxx
Proceeds from sale of investment in associate xxx
Collection of loan receivable xxx
Proceeds from sale of land xxx
Proceeds from sale of building xxx
Proceeds from sale of equipment xxx
Proceeds from sale of intangible asset xxx
Cash acquisition of FV through OCI securities (xxx)
Cash acquisition of investment in associate (xxx)
Cash outflow – Loan receivable (xxx)
Cash acquisition of land (xxx)
Cash acquisition of building (xxx)
Cash acquisition of equipment (xxx)
Cash acquisition of intangible asset (xxx)
Net cash provided by (or used in) investing activities xxx

DIRECT METHOD OF PRESENTATION FOR FINANCING ACTIVITIES

Proceeds from nontrade notes payable xxx
Proceeds from bonds payable xxx
Proceeds from loans payable xxx
Proceeds from mortgage payable xxx
Proceeds from share capital issuance xxx
Repayment of nontrade notes payable (xxx)
Repayment of bonds payable (xxx)
Repayment of loans payable (xxx)
Repayment of mortgage payable (xxx)
Payment of treasury shares (xxx)
Payment of dividends (xxx)
Net cash provided by (or used in) financing activities xxx