STATEMENT OF

CASH FLOWS 1 0 11 0 0 0 1111 0 1 0 111111 0 1111 0 0 0

010100101111010101101101000
Andal, Justine Maureen U. 101100110010011101010111001
Bagui, Edward Glenn 0011001001011111101111111010
1 0 0 1 0 0 111 0 11 0 1 0 0 0 1 0 0 0 0 1 0 0 0 0
Maala, Edsel J.
1110010111011000111101011111
111100001010100101111010101
101000101101100110010011101
111001000001100100101111110
111101011100100111011010001
010000000111001011101100011
 -is a component of financial
STATEMEN statements summarizing the
T OF CASH operating, investing and

FLOWS financing activities of an

entity.
IN SIMPLE
LANGUAGE, WHAT
IS STATEMENT OF
CASH FLOWS?
IT PROVIDES INFORMATION
ABOUT THE CASH RECEIPTS
AND CASH PAYMENTS OF AN
ENTITY DURING A PERIOD.
IT IS AN INTEGRAL PART OF
THE FINANCIAL
STATEMENTS FOR EACH
PERIOD FOR WHICH
FINANCIAL ARE
PRESENTED
WHAT IS THE
PRIMARY PURPOSE
OF A STATEMENT
OF CASH FLOWS?
TO PROVIDE RELEVANT
INFORMATION ABOUT CASH
RECEIPTS AND CASH
PAYMENTS OF AN ENTITY
DURING A PERIOD..
 CASH
COMPRISES CASH ON HAND AND
DEMAND DEPOSITS.

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 CHANGE IN VALUE.
PAS 7, Paragraph 7,
provides that...
AN INVESTMENT NORMALLY QUALIFIES AS A
CASH EQUIVALENT ONLY WHEN IT HAS A
SHORT MATURITY OF THREE MONTHS OR
LESS FROM DATE OF ACQUISITION.
IN OTHER WORDS, THE
INVESTMENT MUST BE
ACQUIRED THREE
MONTHS OR LESS
BEFORE THE DATE OF
MATURITY.
EXAMPLES OF CASH
EQUIVALENTS:
a. Three month BSP Treasury Bill
b. Three-year BSP treasury bill purchased three
months before date of maturity
c. Three-month time deposit
d. Three-month money market instrument or
commercial paper
 • Cash flows are inflows and
outflows of cash and cash
equivalents.
• It shall report cash flows during
the period classified as operating,
investing and financing activities.
 OPERATING
ACTIVITIES
ARE THE CASH FLOWS DERIVED
PRIMARILY FROM THE PRINCIPAL
REVENUE PRODUCING ACTIVITIES
OF THE ENTITY.
EXAMPLES OF CASHFLOWS FROM
OPERATING ACTIVITIES:
a. Cash receipts from sale of goods and rendering
services
b. Cash receipts from royalties, rantal, fees,
commissions and other revenue.
c.Cash payments to suppliers for goods and services.
d.Cash payments for selling, administrative and other
expenses.
EXAMPLES OF CASHFLOWS FROM
OPERATING ACTIVITIES:
a. Cash receipts from sale of goods and rendering
services
b. Cash receipts from royalties, rantal, fees,
commissions and other revenue.
c.Cash payments to suppliers for goods and services.
d.Cash payments for selling, administrative and other
expenses.
TRADING SECURITIES
PAS 7, paragraph 15, provides that cash flows arising
from the purchase and sale of dealing and or trading
securities are classified as operating activities.
SIMILARLY, CASH ADVANCES AND LOANS MADE BY
FINANCIAL INSTITUTION ARE USUALLY
CLASSIFIED AS OPERATING ACTIVITIES.
WHAT ARE
INVESTING
ACTIVITIES?
INVESTING ACTIVITIES ARE CASH
FLOWS DERIVED FROM THE
ACQUISITION AND DISPOSAL OF
LONG TERM ASSETS AND OTHER
INVESTMENTS NOT INCLUDED IN
CASH EQUIVALENT.
AS A SIMPLE GUIDE, INVESTING ACTIVITIES INCLUDE
CASH FLOWS FROM TRANSACTIONS INVOLVING
NONOPERATING ACTIVITIES.
 EXAMPLES OF CASH FLOWS
FROM INVESTING
•a. Cash payments to acquire property, plant and equipment,
intangibles and other long term assets.
ACTIVITIES:
•b. Cash receipts from sales of property, plant and equipment,
•e. Cash advances and loans to other parties other than advances
intangibles and other long term assets.
and loans made by financial institution.
•f. Cash receipts from repayment of advances and loans made to
other parties.

c. Cash payments to acquire equity or debt instruments of

other entities. •g. Cash payments for futures contract, forward contract, option
d. Cash receipts from sales of equity or debt instruments of contract and swap contract.
other entities •h. Cash receipts from futures contract, forward contract, option
contract and swap contract.
 FINANCING
ACTIVITIES
are the cash flows derived fromthe equity capital
and borrowings of the entity.
IN OTHER WORDS,
FINANCING
ACTIVITIES ARE
THE CASH FLOWS
THAT RESULT
A. BETWEEN THE ENTITY AND
THE OWNERS-EQUITY

FROM FINANCING.
B.BETWEEN THE ENTITY AND

TRANSACTIONS:
THE CREDITORS- DEBT
FINANCING
 AS A SIMPLE GUIDE, FINANCING ACTIVITIES
INCLUDE THE CASH FLOWS FROM TRANSACTIONS
INVOLVING NONTRADE LIABILITIES AND EQUITY
OF AN ENTITY.
EXAMPLES OF CASHFLOWS FROM
FINANCING ACTIVITIES:
a. Cash receipts from issuance of ordinary and preference
shares
b. Cash payments to acquire treasury stocks
c. Cash receipts from issuing debentures, loans,notes, bonds,
mortgages and other short or long term borrowings.
d. Cash payments for amounts borrowed
e. Cash payments by a lessee for the reduction of the outstanding
principal lease liability.
 Noncash
Transactions
PAS 7, Paragraph 43, provides that investing and financing
transactions that do not require use of cash or cash equivalents
shall be excluded from the statement of cash flows.
THE FOLLOWING NONCASH
TRANSACTIONS ARE DISCLOSED
SEPARATELY:
a. Acquisition of asset by assuming directly related liability.
Acquisition of asset by issuing share capital.
c.Acquisition of asset by issuing bonds payable.
d. Conversion of bonds payable into share capital.
e. Conversion of preference shares into ordinary shares

INTEREST
PAS 7, Paragraph 33, provides that
interest paid and interest received
shall be classified as operating cash
flows because they enter into the
determination of net income or
loss.
DIVIDENDS
PAS 7, Paragraph 33, provides
that dividend received shall be
classified as operating cash flow
because it enters into the
determination of net income.
 INCOME TAXES
PAS 7, Paragraph 35, provides that cash flows arising
from income taxes shall be separately disclosed as cash
flows fromoperating activities unless they can be
specifically identified with investing and financing
activities.
WHAT IS THE
DIRECT METHOD
OF MAKING THE
STATEMENT OF
THE STATEMENT OF CASH FLOWS

CASH FLOWS?
DIRECT METHOD USES ACTUAL CASH
INFLOWS AND OUTFLOWS FROM THE
COMPANY'S OPERATIONS, INSTEAD
OF MODIFYING THE OPERATING
SECTION FROM ACCRUAL
ACCOUNTING TO A CASH BASIS.
 THE INFLOWS
Accrual accounting recognizes revenue
when it is earned versus when the
AND OUTFLOWS
payment is received from a ARE NETTED TO
customer.Conversely, the cash flow ARRIVE AT THE
direct method measures only the cash CASH FLOW.
that's been received, which is typically
from customers and the cash payments
THE DIRECT
or outflows, such as to suppliers. METHOD IS
ALSO KNOWN
AS THE INCOME
STATEMENT
METHOD.
WHAT IS THE
INDIRECT METHOD
OF MAKING THE
STATEMENT OF
CASH FLOWS?
THE STATEMENT OF CASH FLOWS
PREPARED USING THE INDIRECT
METHOD ADJUSTS NET INCOME FOR
THE CHANGES IN BALANCE SHEET
ACCOUNTS TO CALCULATE THE CASH
FROM OPERATING ACTIVITIES.
 COMPANIES
TEND TO PREFER
In other words, changes in asset and
THE INDIRECT
liability accounts that affect cash
balances throughout the year are added
PRESENTATION
to or subtracted from net income at the TO THE DIRECT
end of the period to arrive at the METHOD BECAU
operating cash flow.The operating SE THE
activities section is the only difference INFORMATION
between the direct and indirect methods.
NEEDED TO
CREATE THIS
REPORT IS
READILY