II.

ACTIVITY

Directions. Form a group with five members each. Prepare a personal cash flow statement

1. Get a ¼ piece of paper (any paper will do if they don’t have a ¼ sheet).
2. Write your monthly allowance (computed by daily allowance x number of days in a month) and
any liabilities that you got from classmates, friends, family members.
3. Write the amount they spend on food, transportation, etc. (make it monthly to match their
allowance).
4. Deduct the amount they spend from the amount their allowance.
5. Associate allowance with inflows and spending with outflows.
6. Tell what is the difference between SCI and SCF.

III. ANALYSIS

Directions. Analyze and answer the following questions.

1. Which of the following groups of categories are shown in the Statement of Cash Flows?
A. Merchandising, operating, financing C. Operating, investing, financing
B. Manufacturing, investing, financing D. Selling, administering, financing
2. Assets are initially recorded at cost. Which cost principle is this based on?
A. Replacement Cost C. Relevant Cost
B. Original Cost D. Current Cost
3. On 1 February 2016, a delivery van was purchased for $45,000. It is expected to have a useful life of 5
years and a trade-in value of $3,000. The current market value for the delivery van is $40,000. Calculate
the Depreciation Expense for the six months ended 30 June 2016.
A. $42,000 C. $8,400
B. $9,000 D. $3,500
4. Accounting is a process that:
A. is only about number crunching
B. only provides information for the managers of the business
C. provides information for decision making
D. is designed only to provide information for the taxation authorities
5. Which of the following is a correct accounting equation?
A. Liabilities – Owners Equity = Assets C. Assets – Owners Equity = Liabilities
B. Owners’ Equity – Assets = Liabilities D. Assets = Owners Equity – Liabilities
6. When a business receives $1,000 cash from Accounts Receivable (Debtors), the effect on the
accounting equation is:
A. a decrease in assets C. no change in total assets
B. a change in owners’ equity D. a change in liabilities
7. Sunway Ltd bought equipment costing $50,000 paying a cash deposit of $20,000 and using a bank loan
for the
balance. As a result of these transactions, its total assets would be:
A. decreased by $20,000 C. increased by $30,000
B. increased by $20,000 D. unchanged
8. Which of the following is not included in liabilities?
A. Accounts Payable (Creditors) C. Office Equipment
 B. Income tax payable D. Bank Loan
9. A 12-month insurance policy of $6,000 was paid on 1 April 2016. What is the amount of Prepaid
Insurance as at 30 June 2016?
A. $1,500 C. $3,000
B. $4,500 D. $6,000
10. Prepaid Rent $8,000, Drawings $70,000, Accounts Receivable $20,000, Loan $75,000, Profit for the
year $100,000, Sales $500,000, Retained Earnings @ Beginning $50,000: What is the Retained Earnings
at End?
A. $80,000 C. $120,000
B. $88,000 D. $150,000

V. APPLICATION

A. Directions. Answer the following questions

1. Gain on sale of property and equipment is part of what activity in the CFS?
2. Changes in long term liabilities is part of what activity in the CFS?
3. Net income is part of which Approach in preparing the CFS?
4. The company presented the following in order to aid the accountant in preparing the CFS: Net income:
P200,000, Depreciation expense: P 25,000, Gain on sale of property and equipment: P100,000, Decrease
in trade and other receivables: P 70,000, Purchase of property and equipment: P200,000, Payment of loan
from bank: P150,000. Compute for the cash generated/used in financing activities.
5.Based on the given above, compute for the net change in cash for the year.
6. If ending balance of cash account is P700,000, prepare the CFS for the year.
7. Identify which of the following transactions fall under operating, investing and financing activities: Cash
received from customers, Cash paid to suppliers, Cash paid to employees, Cash paid to purchase
equipment (company does not sell equipment), Cash received from sale of furniture (company’s main line
of business is not related to furniture),
Depreciation expense, Sale of goods on credit, Purchase of goods on credit, Cash received from getting a
loan from a bank, Cash paid to owners
8. Juana’s sari-sari store had the following transactions during the year: Purchase of goods paid cash
100,000, Sale of goods received cash 150,000, Paid utilities 30,000, Paid rent 10,000, sold equipment for
cash 100,000, Owner withdraws investment 10,000. Compute for the net cash flow generated by/used in
operating activities
9. Using the given above, compute for the net cash flow generated by/used in investing activities.
10. Using the given above, compute for the net cash flow generated by/used in financing activities.
11. Using the given above, prepare a Cash Flow Statement.

12. Prepare the Cash Flow Statement of Teresa’s Delivery Services using the following:
Net Income 500,000 Increase in trade and other payables 150,000
Depreciation expense 70,000 Amount of proceeds from sale of PPE 50,000
Gain on sale of property and equipment 10,000 Paid loan from a bank 100,000
Increase in trade and other receivables – net250,000 Cash, January 1, 2016 70,000
B. Directions. Read each sentence carefully and determine whether the statement is True or False. Write
your answers in the space provided before the number.

__________1. The SCF shows the amount of cash received and used in the business organized according
to operating, investing, and financing activities.
__________2. Cash payment for bank loans are reported under cash flows from operating activities.
__________3. If the company has no accounts receivable balance at the beginning and at the end of the
year, then net sales reported in the SCI will most likely to be equal to the cash received from customers
reported in the SCF
__________4. Payment from acquisition of merchandise inventory are reported as investing activities.
__________5. SCF explains the observed difference in the cash balance from the beginning to the end of
the period.
__________6. Business activities are classified into operating, investing and funding activities in the SCF.
__________7. Salary and utility payments are reported as operating activities.
__________8. Non-cash expense such as depreciation and amortization are deducted from net income to
arrive at the cash from operating activities.
__________9. A negative cash flow from investing is a bad indicator of the company’s ability to generate
cash.
__________10. The bottom line of the SCF is equivalent to the cash balance presented on the SFP.

C. Directions. Prepare the Statement of Cash Flow

The cash account of MNO Company has a beginning balance of 129,937.50. Its year-end balance stands
at 254,925. The summarized transactions from the cash account of MNO Company as follows: Cash
received from customers 725,175, Payments to suppliers 300,547.50, Payments from other operating
expenses 58,850.50, Salaries paid 19,992.50, Purchase of equipment 253,000, Sale of delivery equipment
6,875, Proceed from sale of computer 42,762.50, Withdrawals of owners 229,350, Proceeds from bank
loan 82,500, Contributions of owner 137,500, Interest paid 8,085