CONCEPTUAL FRAMEWORK

&
ACCOUNTING STANDARDS
2019 Edition

Lecture Aid
By: Zeus Vernon B. Millan

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PAS 7 Statement of Cash Flows

Learning Objectives
• Describe the statement of cash flows.
• Differentiate between the following: (1) Operating activities,
(2) Investing activities, and (3) Financing activities.
• State the classifications of the following in a statement of
cash flows: (a) dividends received, (b) dividends paid, (c)
interest paid and (d) interest received.

Conceptual Framework & Acctg. Standards (by: Zeus Vernon B. Millan) 2

Statement of Cash Flows

• The statement of cash flows provides information about

the sources and utilization (i.e., historical changes) of cash
and cash equivalents during the period. The statement of
cash flows presents cash flows according to the following
classifications:
1. Operating activities
2. Investing activities
3. Financing activities
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Standards (by: Zeus Vernon B. Millan)
Activities

1. Operating activities include transactions that enter into the

determination of profit or loss. These transactions normally affect
income statement accounts.

2. Investing activities include transactions that affect long-term

assets and other non-operating assets.

3. Financing activities include transactions that affect equity and

non-operating liabilities.
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Standards (by: Zeus Vernon B. Millan)
Examples of cash flows from Operating
Activities
a. cash receipts from the sale of goods, rendering of
services, or other forms of income
b. cash payments for purchases of goods and services
c. cash payments for operating expenses, such as
employee benefits, insurance, and the like, and
payments or refunds of income taxes
d. cash receipts and payments from contracts held for
dealing or trading purposes

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Standards (by: Zeus Vernon B. Millan)
Examples of cash flows from Investing
Activities
a. cash receipts and cash payments in the acquisition and disposal of
property, plant and equipment, investment property, intangible
assets and other noncurrent assets
b. cash receipts and cash payments in the acquisition and sale of equity
or debt instruments of other entities (other than those that are
classified as cash equivalents or held for trading)
c. cash receipts and cash payments on derivative assets and liabilities
(other than those that are held for trading or classified as financing
activities)
d. loans to other parties and collections thereof (other than loans
made by a financial institution)

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Standards (by: Zeus Vernon B. Millan)
Examples of cash flows from Financing
Activities
a. cash receipts from issuing shares or other equity
instruments and cash payments to redeem them
b. cash receipts from issuing notes, loans, bonds and
mortgage payable and other short-term or long-term
borrowings, and their repayments
c. cash payments by a lessee for the reduction of the
outstanding liability relating to a lease.

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Standards (by: Zeus Vernon B. Millan)
 Conceptual Framework & Acctg.
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Standards (by: Zeus Vernon B. Millan)
Core principle

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Standards (by: Zeus Vernon B. Millan)
Interests and Dividends

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Standards (by: Zeus Vernon B. Millan)
Reporting cash flows from operating
activities
1. Direct method - shows each major class of gross cash receipts
and gross cash payments.

2. Indirect method - adjusts accrual basis profit or loss for the

effects of changes in operating assets and liabilities and effects of
non-cash items.

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Standards (by: Zeus Vernon B. Millan)
 APPLICATION OF CONCEPTS
 

PROBLEM 3: FOR CLASSROOM DISCUSSION

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OPEN FORUM
QUESTIONS????
REACTIONS!!!!!

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Standards (by: Zeus Vernon B. Millan)
 END
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