Department of Education

Bureau of Learning Delivery

Teaching and Learning Division

Grade Level: Grade 11

Specialized Subject: Accountancy, Business and Mgt. 2
Semester: 1st
Week: 5
Module: 5
 About the Module

This module was designed and written with you in mind. It is here to help you
master about Statement of Cash Flow. The scope of this module permits it to
be used in many different learning situations. The language used recognizes
the diverse vocabulary levels of students. The lessons are arranged based on
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.

After going through this module, you are expected to:

• discuss the components and structures of a Statement of Cash Flow
• Prepare a Statement of Cash Flow

What I Know (Pre -test)

Rene Merchandising started a business last October 2020. The following are
its transactions. Classify each transaction as an Operating, Investing or
Financing activity. Write your answer after each item.

1. Additional investment in the business, P22,200

2. Proceeds of sale of equipment, P15,000
3. Collection of interest, P9,000
4. Collection from customers, P315,800
5. Proceeds of bank loan, P200,000
6. Proceeds from sale of furniture, P8,000
7. Payment of operating expenses, P145,000
8. Collection of dividends, P12,000
9. Cash withdrawal of owner, P30,000
10. Payment of interest, P6,000
11. Collection of rent, P30,000
12. Purchase of furniture, P31,000
13. Payment of bank loan, P150,000
 Components and Structures of a
Cash Flow Statement

A statement of cash flows generally presents the sources and utilization of an

organization's cash and cash equivalents. Although the statement of cash
flows is historical in nature, the information contained in such statement is
useful in predicting future cash outflows and inflows of the organization.

This information will aid the organization in their financing decisions. For
example, businesses confronted with forecasted cash shortages may opt to
borrow from the bank or let owners infuse additional capital.

What’s New

A statement of cash flows has three major sections: operating, financing, and
investing. Each section represents the classification of the organizations cash
related activities.

OPERATING INVESTING FINANCING

The 3 components of Cash Flow Statement

What Is It

Operating activities - the cash inflows (receipts) and the cash outflows
(payments) arising from the normal operations of the business:
Receipts of Cash
• collections from customers for the performance of services
or sale of goods
• royalties, fees, commissions
• interest, dividends, and other income
 Payments of Cash

• to suppliers for services and goods acquired

• employees’ salaries

• government licenses and taxes

• interest expense

• other operating expenses

Investing Activities - the cash inflows (receipts) and the cash outflows
(payments) from the purchase and sale of property and equipment,
investment in debt or trading securities, lending money and collection of the
principal amount of the money loaned.

Financing Activities - the cash inflows (receipts) and the cash outflows
(payments) from the owners and creditors of the business

Receipts of Cash

• original and additional investments by owner

• proceeds of loan.
Payments of Cash

• cash withdrawal of owner

• payment for the principal balance of loan

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.
 STRUCTURE OF CASH FLOW STATEMENT

SAMPLE STATEMENT OF CASH FLOW OF RENREN MERCHANDISING

RENE MERCHANDISING
STATEMENT OF CASHFLOWS
FOR THE YEAR ENDED DECEMBER 31, 2019

Cash Flows from Operating Activities

Receipts
Collections from Customers 315,800.00
Cash receipt from supplier 30,000.00
Rent Income 15,000.00
Dividends Income 12,000.00
Interest Income 23,000.00
Payments
Payment for Taxes and licenses (24,000.00)
Payment for suppliers (56,000.00)
Payment for salaries (24,000.00)
Payment for other operating expenses (112,000.00)
Net Cash from Operating Activities 179,800.00

Cash Flows from Investing Activities

Receipts
Proceeds from the sale of old equipment 21,500.00
Proceeds from the sale of old computer 7,800.00
Payments
For the purchase of new laptop (35,000.00)
For the purchase of new equipment (365,000.00)

Net Cash from Investing Activities (370,700.00)

Cash Flows from Financing Activities

Receipts
Additional investment of the owner 226,000.00
Proceeds of bank loan 430,000.00
Payments
Cash withdrawal of the owner (150,000.00)
Payments of bank loan (265,000.00)
Net cash from Financing Activities 241,000.00

Net Increase in Cash 50,100.00

Cash Balance - January 1, 2019 236,000.00
Cash Balance - December 31, 2019 286,100.00

What can I do?

The following data below are taken from the records of Juan Two Three
Merchandising. Make a cash flow statement for each of the following
transactions.

Additional investment of Mr. Juan P 200,000.00

Purchased transportation
equipment 120,000.00

Paid loan to China Bank 30,000.00

Cash sales 50,000.00

Paid rent for the month 23,000.00

Paid Utilities for the month 8,000.00

Purchased office supplies 2,000.00

Paid insurance for the year 20,000.00

Cash withdrawal of Mr. Juan 15,000.00

Paid employees' salaries 65,000.00

 What I Need to Remember

The Statement of Cash Flows summarizes the cash receipts and cash
disbursements for the accounting period. It summarizes the cash
activities of the business by classifying cash inflows (receipts) and cash
outflows (payments) into operating, investing, and financing activities.
It shows the net increase or decrease of cash in each period and the
cash balance at the end of the period. This allows management to assess
the ability of the business to generate cash and project future cash
flows.

Components of the Statement of Cash Flows classified according to activities:

Operating Activities — the cash inflows (receipts) and the cash outflows
(payments) arising from the normal operations of the business.

Investing Activities - the cash inflows (receipts) and the cash outflows
(payments) from the purchase and sale of property and equipment,
investment in debt or trading securities, lending money and collection of the
principal amount of the money loaned.

Financing Activities - the cash inflows (receipts) and the cash outflows
(payments) from the owners and creditors of the business.
 Assessment (Post -test)
The following data below are taken from the records of BING LAUNDRY SHOP
for the year ending December 31, 2019. Cash balance on January 1, 2019
was P136,000.00. Make a cash flow statement for each of the following
transactions:
Collections from Customers 200,000.00
Cash receipt from supplier 10,000.00
Rent Income 15,000.00
Cash withdrawal of the owner 50,000.00
Payments of bank loan 65,000.00
Dividends Income 4,500.00
Interest Income 4,700.00
Payment for Taxes and licenses 24,000.00
Payment for suppliers 56,000.00
Payment for salaries 24,000.00
Payment for other operating expenses 52,000.00
Additional investment of the owner 26,000.00
Cash from bank loan 30,000.00
For the purchase of new laptop 15,000.00
For the purchase of new equipment 65,000.00
Cash received from sale of old equipment 21,500.00
Proceeds from the sale of old computer 7,800.00

References

Textbook
Beticon, J., et al. Accountancy, Business and Management 2
Congratulations!
You are now ready for the next module. Always remember the
following:
1. Make sure every answer sheet has your
o Name
o Grade and Section
o Title of the Activity or Activity No.
2. Follow the date of submission as agreed with your teacher.
3. Keep the modules with you.
Return them at the end of the quarter.