Statement of Cash Flows

Prepared and Presented:

NINA GLORIA Z. PENDANG

 INTRODUCTION
• CASH is the most important asset of the
business.
• It is the business’ concern to know the
movements of cash- the sources and
applications.
• Basically, the Statement of Cash Flows is
similar of Statement of Cash Receipts and
Disbursement.
 Cash Receipts
• Receipts are inflows or sources while
Disbursement are outflows or uses
 Let’s take this simple illustration in a
summary form:
Cash at the beginning of the period P100
Add: Cash Receipts 70
Total Cash Available 170
Less: Cash Disbursement 120
Cash Balance at the end of the P50
period
 What is Statement of Cash Flows
• A financial statement that provides
information about the causes of change in the
company’s cash balance from the beginning
up to the end of specific period.
• Like Statement of Comprehensive Income, it is
dated “for the period ended.”
 What are the Major Activities of Statement
of Cash Flows?
• As the Statement of Cash Flows will tell us in
details, what caused the changes in cash
balance, we grouped the transactions into
three (3) major activities, these are as follows:
1. Operating Activities
2. Investing Activities
3. Financing Activities
 Operating Activities
• Show the inflows and outflows of cash from
the normal operating activities. Examples are:
a) Cash Inflows:
1. Cash received from sale of goods and
services
2. Cash received from royalties, fees,
commission and other revenue
• Cash Outflows:
1. Cash paid to suppliers of goods and services
2. Cash paid to employee’s salaries
3. Cash paid for taxes and licenses
4. Cash paid for interest and other operating
expenses
 2 methods of presenting Statement of Cash
Flows under Operating Activities
1. Direct Method
2. Indirect Method

Under the direct method, the company’s net cash provided

by (used in operating activities is arrived at by adding the
individual operating cash inflows and then deduct the
individual operating cash outflows while under indirect
method, it derives the net cash provided by (used in)
operating activities by adjusting profit for income and
expense item that do not involved any cash outlay, like
depreciation. Depreciation is added back to profit.
 Investing Activities
• Show the inflows and outflows of each arising
from the following transactions.
• Cash Inflows:
a. Cash received from sale of property and
equipment
b. Cash receipts from collections of long term
receivable
• Cash Outflows
a. Cash paid for acquisition of property and
equipment
b. Cash paid for loans to other parties
 Financing Activities
• Show the inflows and outflows of cash arising
from the following transactions.
• Cash Inflows
a. Cash received from investments by the
owner
b. Cash receipts from obtaining bank loan
• Cash Outflows
a. Cash paid to owner for withdrawal
b. Cash paid to bank for loan obtained
c. Cash paid to shareholders on corporate
dividends
HOW TO PREPARE THE STATEMENT OF CASH