Fundamentals of Accountancy,

Business, and Management 2

Lesson 4: Statement of Cash Flows
Welcome to
Sir Marjon’s FABM 2 Lesson
 Learning Objectives
1 Differentiate 2 Prepare a 3 Solve accounting
operating, statement of cash problems related
investing and flows under the to cash flows.
financing direct and
activities; indirect method;
and
 Let’s Review: Financial Statements
A structured presentation of the financial position and
financial performance of an entity. The objective of
financial statements is to provide information about
financial position, financial performance and cash flows
of an entity that is useful to a wide range of users in
making economic decisions.

*International Accounting Standards 1 (IAS 1)

Let’s Review: Financial Statements
To meet this objective, financial statements provide information
about an entity’s:
a. Assets;
b. Liabilities;
c. Equity;
d. Income and expenses, including gain and loses;
e. Contributions by and distributions to owners in their capacity
as owners; and
f. Cash flows.
Let’s Review: Financial Statements
To meet this objective, financial statements provide information
about an entity’s:
a. Assets;
b. Liabilities;
c. Equity;
d. Income and expenses, including gain and loses;
e. Contributions by and distributions to owners in their capacity
as owners; and
f. Cash flows.
 Did you know?
Did you know that dogs can smell your
feelings?
Dogs can pick up on subtle changes in
your scent, which can help him figure out
how you are feeling, such as by smelling
your perspiration when you become
nervous or fearful.
Did you know that a cat uses its whiskers
as feelers to determine if a space is too
small to squeeze through?
Also, cats love to sleep. A fifteen-year-old
cat has probably spent ten years of its life
sleeping.
 We will talk about this first.
A statement of cash flow is a financial statement that provides
aggregate data regarding all cash inflows that a company receives
from its ongoing operations and external investment sources. It also
includes all cash outflows that pay for business activities and
investments during a given period.
 Activities related to cash flow

Operating Activities Investing Activities Financing Activities

Activities of an entity
Activities of an entity Activities of an entity
related to their main
related to sale and purchase related to acquisition of
revenue generating
of long term assets and funding for use of the entity
activities of providing
other investments
goods and rendering
services
 Activities related to cash flow

Operating Activities Investing Activities Financing Activities

Where to see in the FS Where to see in the FS Where to see in the FS
usually? usually? usually?

- Income statement - Balance sheet, noncurrent - Balance sheet, noncurrent

- Balance sheet, current assets assets liabilities
- Balance sheet, current liabilities - Equity
 Operating Activities
Cash Inflow Cash Outflow

- Cash received from sales and - Payments to suppliers

services revenue - Payment of operating expenses
- Collection of accounts - Payment for interest expense
receivable - Charity contributions
- Refunds from supplier - Cash refund to costumers
 Investing Activities
Cash Inflow Cash Outflow

- Cash proceeds from selling - Payments for the purchase of

productive assets productive assets
- Cash proceeds from selling - Payments to acquire investments in
investments in equity securities of equity securities
other companies
 Financing Activities
Cash Inflow Cash Outflow

- Cash investments by the owner - Cash withdrawal by the owner

- Cash proceeds from issuance of - Payments of cash dividends to
share capital shareholders
- Cash proceeds from long-term - Payments of long-term borrowing
borrowing
Madam Lalisa Manoban established her own service company. She
invested 2,000,000 to open the business and has purchased some
computer equipment worth 120,000 and office furniture worth
80,000. During the year, 500,000 revenues were earned, 200,000 of
which were on account. Salaries paid to employees amounted to
150,000, office rent payment is 40,000, and utilities paid amounted
to 30,000. Receivables collected amounted to 70,000. The owner
withdrew 100,000 for a personal emergency. At the time when the
carrying value of the furniture was 70,000, Madam Lisa sold it for
75,000 cash.
― Pinterest
Operating Activities Investing Activities Financing Activities

4. Cash received from 2. Purchase of computer 1. Investment by the owner,

service revenue, 300,000 equipment, 120,000 2,000,000

5. Salaries expense, 3. Purchase of office 9. Withdrawal, 100,000

150,000 furniture, 80,000

6. Office rent expense, 10. Proceeds from selling of

40,000 furniture, 75,000

7. Utilities expense, 30,000

8. Cash receivable, 70,000

― Pinterest
Try this?
1. How much is the entity’s cash flow from
operating activities?
2. How much is the entity’s cash flow from
investing activities?
3. How much is the entity’s cash flow from
financing activities?
4. How much is the cash balance at the end
of the year 20X3?
5. Prepare the entity’s statement of cash
flows. Using the direct method.
To be continued…
Do you have any questions?
marjongarabel.1993@gmail.com
09519229524
Sir Marjon
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