FUNDAMENTALS

OF ACCOUNTANCY, BUSINESS, AND MANAGEMENT 2

STATEMENT OF CHANGES IN EQUITY
All changes, whether increases or decreases to the owner’s interest on the company during the period are reported here. This
statement is prepared prior to preparation of the Statement of Financial Position to be able to obtain the ending balance of the equity
to be used in the SFP.

SINGLE/SOLE PROPRIETORSHIP –An entity whose assets, liabilities, income and expenses are centered or owned by only one person.
PARTNERSHIP – An entity whose assets, liabilities, income and expenses are centered or owned by two or more persons.
CORPORATION – An entity whose assets, liabilities, income and expenses are centered or owned by itself being a legally separate
entity from its owners. Owners are called shareholders or stockholders of the company.

Initial Investment – The very first investment of the owner to the company.
Additional Investment – Increases to owner’s equity by adding investments by the owner
Withdrawals –Decreases to owner’s equity by withdrawing assets by the owner

*Distribution of Income – When a company is organized as a corporation, owners (called shareholders) do not decrease equity by way
of withdrawal. Instead, the corporation distributes the income to the shareholders based on the shares that they have (percentage of
ownership of the company)
A. For Sole Proprietorship

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PREPARED BY: MS. JAM A. MAGALANG 1 SCE and CFS⏐1 SEM⏐SY2018-2019
 FUNDAMENTALS OF ACCOUNTANCY, BUSINESS, AND MANAGEMENT 2



B. For Partnership

C. For Corporation

CASH FLOW STATEMENT
Provides an analysis of inflows and/or outflows of cash from/to operating, investing and financing activities. This statement shows
cash transactions only compared to the SCI which follows the accrual principle.
Importance: The CFS provides the net change in the cash balance of a company for a period. This helps owners see if their revenues
are actually translated to cash collections or if they have enough cash inflows in order to pay any maturing liabilities.

• Direct – The operating cash flow section of the CFS under the direct method would show each major class of gross cash
receipts and gross cash payments
• Indirect – The operating cash flow section of the CFS under the indirect method will reconcile the net income/loss of the
company with the total cash flows generated/used in operating activities by adjusting the net income/loss for effects of non-
cash transactions

Different Parts of the Cash Flow Statement

• Operating Activities – Activities that are directly related to the main revenue-producing activities of the company such as
cash from customers and cash paid to suppliers/employees
• Investing Activities – Cash transactions related to purchase or sale of non-current assets.
• Financing Activities – Cash transactions related to changes in equity and borrowings.
• 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.

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PREPARED BY: MS. JAM A. MAGALANG 2 SCE and CFS⏐1 SEM⏐SY2018-2019
 FUNDAMENTALS OF ACCOUNTANCY, BUSINESS, AND MANAGEMENT 2



Cash flows from Operating Activities

Cash Inflows

- Receipts from sale of goods and performance of service

- Receipts from royalties, fees, commissions and other revenues

Cash Outflows

- Payments to suppliers of goods and services

- Payments to employees
- Payments for taxes
- Payments for interest expense
- Payments for other operating expense

Cash Flows from Investing Activities

Cash Inflows

- Receipts from sale of property and equipment

- Receipts from sale of investments in debt or equity securities
- Receipts from collections on notes receivable

Cash Outflows

- Payments to acquire property and equipment

- Payments to acquire debt or equity securities
- Payments to make loans to others generally in the form of notes receivable

Cash Flows from Financing Activities

Cash Inflows

- Receipts from investments by owners

- Receipts from issuance of notes payable

Cash Outflows

- Payments to owners in the form of withdrawals

- Payments to settle notes payable

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PREPARED BY: MS. JAM A. MAGALANG 3 SCE and CFS⏐1 SEM⏐SY2018-2019