ORIENTAL MINDORO NATIONAL HIGH SCHOOL

(Formerly Jose J. Leido, Jr. Memorial High School)

J.P Rizal St., San Vicente East, Calapan City, Oriental Mindoro

Supplementary Learning Materials for

Senior High School Learners

Week 5
CONTENT STANDARD: The learners demonstrate an understanding of the components and the structure
of a CFS that will equip him/her in the preparation of the said financial report

PERFORMANCE STANDARD: The learners are able to solve exercises and problems that require
preparation of a CFS.

MOST ESSENTIAL LEARNING COMPETENCIES:

> Discuss the components and structure of a Cash Flow Statement (CFS). (ABM_FABM12-If-10).
> Prepare a CFS (ABM_FABM12-If-11)

Prepared by: Rhodora Anoud O. Adarlo

Page 1 of 8
Accountancy, Business, and Management
 ORIENTAL MINDORO NATIONAL HIGH SCHOOL
(Formerly Jose J. Leido, Jr. Memorial High School)
J.P Rizal St., San Vicente East, Calapan City, Oriental Mindoro

Week 5
Cash Flow Statement
What this module is about
The Cash Flow Statement (CFS) tells a specific story about the cash transactions of the company. Cash is a very
vital resource owned and controlled by the business. Also, this resource is the most susceptible to theft and
mismanagement. Finally, not all tansactions involve physical flow of money or cash due to the use of accrual basis of
accounting.

Because of these reasons, reader are also interested in the cash transactions of the company aside from the
financial position and performance. Cash can be used or derived from operating, investing, and / or financing activities.

This module has two lessons:

1. Components and structure of a Cash Flow Statement
2. Preparation of Cash Flow Statement

What you are expected to learn

This module will enable you to:

• Recall and describe specific account titles such as Accruals and depreciations.
• Identify the different components and structures of a CFS
• Describe each component and structure of a CFS.
• Make a CFS with proper identification/classification of its components

How to learn from this module

To achieve the objectives of this module, do the following:

1. Take your time reading the lessons carefully.

2. Follow the directions and/or instructions in the activities diligently.
3. Answer all the given tests and exercises.
4. Familiarize yourself with the following terms:

Term Definition
Cash Flow - Provides an analysis of inflows and/or outflows of cash from/to operating, investing
Statement and financing activities (Deloitte Global Services Limited, 2015). This statement shows
cash transactions only compared to the SCI, which follows the accrual principle.

- are the baseline cash activities of the entity related to its normal operating cycle.
Operating Activities
Furthermore, such activities are related to the primary revenue- producing activity of the
entity. Incidentally, such transactions will be related to profit determination.

- Investing activities generally result from acquisition and disposal of non-current assets.
Investing Activities
- Usually arise from changes in non-current liabilities and owner’s equity of a business
organization.

Financing Activities
Page 2 of 8
Accountancy, Business, and Management
 ORIENTAL MINDORO NATIONAL HIGH SCHOOL
(Formerly Jose J. Leido, Jr. Memorial High School)
J.P Rizal St., San Vicente East, Calapan City, Oriental Mindoro

What to do before (Pretest)

Name of Learner:___________________________
Grade Level/Section: _______________________ Date: _________________

Skill Reinforcement.

Below are the cash transactions of Zian Paul Co. for December 31, 2018.

Cash Payment to suppliers of goods and services P 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
Proceeds from cash investment of owners 115, 000.00
Payment for acquisition of equipment 100, 000.00
Cash at the beginning of the year 1, 000,000.00
Instructions: Answer the following questions:

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 net increase or decrease in cash for the year? ___________________
5. How much is the cash as of December 31, 2018?___________________

Lesson 1 Components and Structure of CFS

Accruals & Depreciation – a recall

Accrual - Refers to an accounting method where revenue or expenses are recorded when a transaction occurs
rather than when payment is received or made. (Investopedia)
Examples: Accrued Income, Accrued Expenses.

Depreciation - The systematic allocation of the depreciable amount of an asset over its useful life. Depreciable amount
is the cost of an asset less its residual value. (International Accounting Standard 16)
Examples: depreciation of Property, Plant, and Equipment.
What you will do

Name of Learner: ______________________________________________

Grade Level/Section: __________________________________________ Date: _____________________________

Activity No. /Title: 1.1 (Knowledge Check)

Instructions: Below are independent transactions. Analyze each if it represents accrual or depreciation. Check the
proper column. If the transaction does not represent either of the two, check the “others” column.

TRANSACTION ACCRUAL DEPRECIATION OTHERS

1. Bought equipment with useful life of 10 years with no salvage
value.
2. Perform service to client, payment was not yet receives
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Accountancy, Business, and Management
 ORIENTAL MINDORO NATIONAL HIGH SCHOOL
(Formerly Jose J. Leido, Jr. Memorial High School)
J.P Rizal St., San Vicente East, Calapan City, Oriental Mindoro

3. At the end of the month, the useful life of Machineries which

was purchased a month ago is reduced by P2, 000.00.
4. Received payment from client for service performed.
5. Received electric bill for the month

Major Sections of CFS

A statement of Cash Flows has three major sections; operating, financing, and investing. Each sections represents
the classification of the organization’s cash related

activities.

DECISION RULE IN DETERMINING CLASSIFICATION OF CASH TRANSACTIONS

Example of transactions (listed by IAS, Statement of Cash Flows (IASB, 2001))

Operating Activities Investing Activities Financing Activities

Cash receipts from sale of goods
and rendering of services (+)
Cash receipts from royalties, fees,
commission, and other revenue (+)
Cash payments to suppliers of
goods and services (-)
Cash payments to employees (-)
Cash payments to income taxes (-)
Interest Paid (-)
Interest Received (+)
Dividends Received (+)
Cash payments to acquire property, Cash investments from owners (+)
plant, and equipment (-)
Cash payments to acquire intangible Cash proceeds from bank loans (+)
assets (-)
Cash receipts from sale of property, Cash distributions to owners (-)
plant, and equipment (+)
Cash receipts from sale of intangible Repayment of bank loans (-)
assets (+)
Cash receipts from sale of long-term
assets (+)

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Accountancy, Business, and Management
 ORIENTAL MINDORO NATIONAL HIGH SCHOOL
(Formerly Jose J. Leido, Jr. Memorial High School)
J.P Rizal St., San Vicente East, Calapan City, Oriental Mindoro

What you will do

Name of Learner: ______________________________________________

Grade Level/Section: __________________________________________ Date: _____________________________

Activity No. /Title: 1.2 (Classification of Concepts)

Instructions. Determine each transaction as to their proper section. Check the section where they belong

Transaction Operating Investing Activities Financing

Activities Activities
1. Cash receipt from sale of
machineries
2. Cash receipt from sale of patent
3. Cash proceeds from loan on ZPA
bank
4. Proceed from dividend
5. Repayment of loan from PZA
Bank
6. Purchase of Land
7. Payment of tax to BIR
8. Purchase of Trademarks
9. Payment to Princess Company-
a supplier
10. Proceed from sale of
merchandise

LESSON 2. Preparation of Cash Flow Statement

1. Determine the heading
The heading of the business includes the company name, title of the statement, and the period covered by
the statement. Below is the heading of the statement of cash flow for the illustrative case:

UY LAW OFFICE
Statement of Cash Flows
For the Period Ended December 31, 2015

2. Analyze the cash transactions

Below is the cash T- Account of Uy Law Office:

CASH - 1001

Dec. 1 P 500, 000.00 Dec. 1 P 10, 000.00

Dec. 1 100, 000.00 Dec. 1 120, 000.00
Dec. 8 37, 500.00 Dec. 2 5, 000.00
Dec. 15 135, 000.00 Dec. 8 36, 000.00
Dec. 22 35, 000.00 Dec. 17 25, 000.00
Dec. 31 23, 000.00
______________________________________________________________________________
807, 500.00 219, 000.00
588, 500.00

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Accountancy, Business, and Management
 ORIENTAL MINDORO NATIONAL HIGH SCHOOL
(Formerly Jose J. Leido, Jr. Memorial High School)
J.P Rizal St., San Vicente East, Calapan City, Oriental Mindoro

Based on the descriptions of each transactions, they were analyzed in the succeeding table:

Debits Amount Nature Classification Reason Notation

Dec. 1 500, 000.00 Cash investment of owner Financing Affects equity A
Dec. 1 100, 000.00 Proceeds from bank loan Financing Affects non-current B
liability
Dec. 8 37, 500.00 Collection from customers Operating Affects net income C
Dec. 15 135, 000.00 Collection from customers Operating Affects net income D
Dec. 22 35, 000.00 Collection from customers Operating Affects net income E

Credits Amount Nature Classification Reason Notation

Dec. 1 10, 000.00 Payment of business permits Operating Affects net income F
Dec. 1 120, 000.00 Payment for annual rent Operating Affects net income G
Dec.2 5, 000.00 Purchase of office supplies Operating Affects net income H
Dec. 8 36, 000.00 purchase of equipment Investing Affects non-current assets I
Dec. 17 25, 000.00 Cash withdrawal of owner Financing Affects equity J
Dec. 31 23,000.00 Payment of salaries Operating Affects net income K

3. Prepare the Operating Activities Section

CASH FLOW FROM OPERATING ACTIVITIES

Cash Receipts from rendering of Service P207, 500.00 C,D,E
Cash payments to suppliers of goods and services ( 158, 000.00) F,G,H,K
Net cash flow from operating activities 49, 500.00
4. Prepare the Investing Activities Section
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant, and equipment ( 36, 000.00) I

5. Prepare the Financing Activities Section

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from cash investment of owners 500, 0000.00 A
Proceeds from bank loans 100, 000.00 B
Payment to owners ( 25, 000.00) J
Net cash flows from financing activities 575, 000.00

6. Determine the Net Increase or Decrease in Cash

Net cash flow from operating activities 49, 500.00
Cash flow from investing activities (36, 000.00)
Net cash flows from financing activities 575, 000.00
Net Increase in Cash 588, 500.00

7. Determine the cash at the end of the period.

The beginning balance of the cash is added to the net increase or net decrease in cash to arrive at the ending balance.
Assume that the beginning balance of Cash as of January 1, 2015 is P 200, 000.00.

Net Increase in Cash P 588, 500.00

Cash at the beginning of the period 200, 000.00
Cash at the end of the period 788, 500.00

Finally, below is the completed Cash Flow Statement for Uy Law Office:

UY LAW OFFICE
Statement of Cash Flows
For the Period Ended December 31, 2015

Page 6 of 8
Accountancy, Business, and Management
 ORIENTAL MINDORO NATIONAL HIGH SCHOOL
(Formerly Jose J. Leido, Jr. Memorial High School)
J.P Rizal St., San Vicente East, Calapan City, Oriental Mindoro

CASH FLOW FROM OPERATING ACTIVITIES

Cash receipts from rendering of services P 207, 500.00
Cash payment to suppliers of goods and services ( 158, 000.00)
Net cash flow from operating activities 49, 500.00

CASH FLOW FROM INVESTING ACTIVITIES

Purchase of property, plant, and equipment ( 36, 000.00)

CASH FLOW FROM FINANCING ACTIVITIES

Proceeds from cash investment of owners 500, 000.00
Proceeds from bank loans 100, 000.00
Payment to owners ( 25, 000.0)
Net cash flows from financing activities 575, 000.00

NET INCREASE IN CASH 588, 500.00

CASH AT THE BEGINNING OF THE PERIOD 200, 000.00
CASH AT THE END OF THE PERIOD 788, 500.00

What you will do

Name of Learner: ______________________________________________

Grade Level/Section: __________________________________________ Date: _____________________________

Activity No. /Title: 1.3 (Skill Reinforcement)

Skill Reinforcement.
. Below are the cash transactions of California Trading for December 31, 2015

Cash payment to suppliers of goods and services (P 62, 500.00)

Cash receipts from rendering of services 125, 000.00
Payment to owners (12, 500.00)
Proceeds from bank loans 62, 500.00
Proceeds from cash investment of owners 287, 500.00
Payment for acquisition of equipment 250, 000.00
Cash at the beginning of the year 2, 500,000.00

Instructions: Prepare a Cash Flow Statement. After which, answer the following questions:

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 net increase or decrease in cash for the year? __________________________
5. How much is the cash as of December 31, 2015? _______________________

Let’s summarize

1. Statement of Changes in Equity reports any increase or decrease in owner’s capital as of end of the period.
2. Statement of Changes in Equity has the following elements- heading, beginning capital, additional investments,
net income or net loss, withdrawals, and ending capital.

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Accountancy, Business, and Management
 ORIENTAL MINDORO NATIONAL HIGH SCHOOL
(Formerly Jose J. Leido, Jr. Memorial High School)
J.P Rizal St., San Vicente East, Calapan City, Oriental Mindoro

3. There are three forms of business organization – Sole Proprietorship, Partnership, and Corporation. Each forms
has their own features, advantages and disadvantages.

Posttest
A. CFS PREPARATION

Name of Learner:___________________________
Grade Level/Section: _______________________ Date: _________________

Classification of Concepts. Determine each transaction whether they are operating, financing, or investing.
After which indicate reason for such classification and indicate the effect of the transactions to cash flows.

Transaction Activity Reason Effect

Payment to supplier of goods Operating Affects profit or loss Decreases cash
Payment to supplier of services
Receipts from good sold
Receipts from services rendered
Payment to employees
Purchase of equipment
Purchase of fixtures
Purchase of patents
Purchase of copyrights
Purchase trademarks
Payment of interests
Proceeds from interests
Payment to owners
Payment of income taxes
Proceeds from long-term debt
Payment of long-term debt
Proceeds from sale of vehicle
Proceeds from sale of patents
Proceeds from sale of copyrights
Proceeds from sale of trademarks

Think Tank! A company is only as good as how well its accounting is done.
----------End of Week 5----------

References: FABM Teaching Guide; Fundamentals of Accountancy, Business, and Management 2 by Beticon, Domingo, and Yabut.;WorldWideWeb

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Accountancy, Business, and Management