Fundamentals of

Accounting, Business
and Management 2
Quarter 1 – Module 4:
Cash Flow Statement (CFS)
Introductory Message

For the facilitator:

Welcome to the Fundamentals of Accounting, Business and Management 2 –

Grade 12 Alternative Delivery Mode (ADM) Module on the Cash Flow Statement

(CFS)!

This module was collaboratively designed, developed, and reviewed by

educators both from public and private institutions to assist the teacher or facilitator

in helping the learners meet the standards set by the K to 12 Curriculum while

overcoming their personal, social, and economic constraints in schooling.

This learning resource hopes to engage the learners into guided and

independent learning activities at their own pace and time. Furthermore, this also

aims to help learners acquire the needed 21st century skills while taking into

consideration their needs and circumstances.

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the module:

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module. You also need to keep track of the learners' progress while allowing them

to manage their own learning. Furthermore, you are expected to encourage and

assist the learners as they do the tasks included in the module.

1
 For the learner:

Welcome to the Fundamentals of Accounting, Business and Management 2 –

Grade 12 Alternative Delivery Mode (ADM) Module on the Cash Flow Statement
(CFS)!

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 What I Need to Know

CASH FLOW STATEMENT (CFS)

This module is about the elements of a cash flow statement. It is a statement

that reflects the cash transactions of a business.

At the end of the lessons, you should be able to:

1. Discuss the components and structures of a Cash Flow Statement (CFS)

(ABM_FABM12-If-10)

2. Prepare a CFS (ABM_FABM12-If-11)

What I Know

You may have heard of the Cash Flow Statement during the FABM 1. Here,
the cash transactions are the once we’re familiar with, however these accounts are
needed to be classified according to the activity and used. Test your instinct on this
task.

Put a check if the following transaction is operating, investing, or financing activity.

Transaction Operating Investing Financing

1. Payment of operating expenses
2. Collection of interest
3. Collection from customers
4. Payment of interest
5. Collection of rent
6. Purchase of furniture
7. Additional investment
8. Proceeds of sale of equipment
9. Payment of bank loan
10.Proceeds of bank loan
11.Proceeds from sale of furniture
12.Collection of dividends
13.Cash withdrawal of the owner
 Lesson
Components of Cash Flow
1 Statement
The cash flow statement shows the cash receipts (inflow) and disbursement
(outflow) for an accounting period. Somehow, it literally shows transactions of (1)
cash inflows because there is an increase in cash; like the collection of receivables,
cash sales or cash services and receiving proceeds of the loan, to name a few; and
(2) cash outflows because there is a decrease in cash; like buying equipment, paying
employee salaries, payment of the loan.

Cash receipts (cash inflows) increase the amount of cash while cash
disbursement (cash outflows) decreases it. However, these cash transactions have
to be classified according to the activity it is used for. These classifications are
operating, investing and financing activities. With proper cash management, it helps
the business assess or project future actions.

To further illustrate how to recognize the transactions from each activity,

below is the cash ledger of ABM Consultancy Services:

Transactions Amount

Payment of operating expenses P 25,400

Collection of interest 5,000
Collection from customers 35,000
Payment of interest 2,000
Collection of rent 3,500
Purchase of furniture 25,000
Additional investment 20,000
Proceeds of sale of equipment 7,000
Payment of bank loan 20,000
Proceeds of bank loan 40,000
Proceeds from sale of furniture 8,900
Collection of dividends 3,000
Cash withdrawal of the owner 30,000
 A. OPERATING ACTIVITIES

These are cash transactions, receipts (inflow) or disbursements (outflow), arising

from the conduct of operations of the business.

Cash Inflows Cash Outflows

 Collection from customers for the
sale of goods or services
 Received royalties, fees or
commission
 Interest income, dividends
and other income
 suppliers for their service or
goods acquired
 employees' salaries
 government licenses and taxes
 interest expense
 other operating expenses

B. INVESTING ACTIVITIES

These are cash transactions, receipts (inflow) or disbursements (outflow), arising

from:

Cash Inflows Cash Outflows

 Sale of property and equipment  Purchase of property and

 Sale of investments in debt or equipment
trading securities  Purchase of investment in debt
 Collection of principal amounts and trading securities
from money loaned to others  Lending money to others

C. FINANCING ACTIVITY

These are cash transactions, receipts (inflow) or disbursements (outflow), arising

from transactions of the owners and creditors of the business.

Cash Inflows Cash Outflows

 Cash withdrawals of the owner

 Investments by the owners
 Payment of the principal balance
 Proceeds of borrowed money
of borrowed money
 D. COMPLETING THE CFS

The following transactions are taken from the cash ledger of ABM Consultancy
Services. Classify the transactions as to operating, investing or financing activity.

Transactions Amount Activity +/-

Payment of operating expenses P 25,400 OPERATING -
Collection of interest 5,000 OPERATING +
Collection from customers 35,000 OPERATING +
Payment of interest 2,000 OPERATING -
Collection of rent 3,500 OPERATING +
Purchase of furniture 25,000 INVESTING -
Additional investment 20,000 FINANCING +
Proceeds of sale of equipment 7,000 INVESTING +
Payment of bank loan 20,000 FINANCING -
Proceeds of bank loan 40,000 FINANCING +
Proceeds from sale of furniture 8,900 INVESTING +
Collection of dividends 3,000 OPERATING +
Cash withdrawal of the owner 30,000 FINANCING -

Tips for easier computation: First, classify the transactions as to operating,

investing, or financing. Then, put a plus (+), or a minus (-) sign to identify which
transactions are inflows or outflows.
Now, let’s prepare a cash flow statement. Let’s assume that the business
started from scratch, so there is no beginning cash balance per record.
Notice that after transactions are classified per activity, cash inflows are added while
outflows are deducted.

Steps in preparing Cash Flow Statement:

1. Write the heading at the center of the page. It should consist of the name of
the company, name of the financial statement (cash flow statement), and the
date of the accounting period of the CFS which usually starts with the phrase
“For the month/year ended”.

ABM Consultancy Services

Cash Flow Statement
For the month ended June 30, 2020
 2. List all operating activities from inflow to outflow. Outflow amounts should
be written with parenthesis to indicate that these amounts are negative to
the account. The difference between inflow and outflow is called Net Cash
Flow from Operating Activities. From the analysis of the transactions of
ABM

Cash Flows from Operating Activities

Collection of interest ₱ 5,000
Collection from customers 35,000
Collection of rent 3,500
Collection of dividends 3,000
Payment of interest (2,000)
Payment of operating expenses (25,400)
Net Cash Flow from Operating Activities ₱ 19,100
Consultancy, here are the operating activities:

3. List all investing activities from inflow to outflow. Outflow amounts should
be written with parenthesis to indicate that these amounts are negative to
the account. The difference between inflow and outflow is called Net Cash
Flow from Investing Activities. From the analysis of the transactions of ABM
Consultancy, here are the investing activities:

Cash Flows from Investing Activities

Proceeds from sale of furniture ₱ 8,900
Proceeds of sale of equipment 7,000
Purchase of furniture (25,000)
Net Cash Flow from Investing Activities (9,100)

4. List all financing activities from inflow to outflow. Outflow amounts should
be written with parenthesis to indicate that these amounts are negative to
the account. The difference between inflow and outflow is called Net Cash
Flow from Financing Activities. From the analysis of the transactions of ABM
Consultancy, here are the financing activities:
 Cash Flow from Financing Activities
Additional investment ₱ 20,000
Proceeds of bank loan 40,000
Cash withdrawal of the owner (30,000)
Payment of bank loan (20,000)
Net Cash Flow from Financing Activities 10,000

5. Sum all the net amounts from each activity. The result will show the net
increase (if positive), or decrease (if negative) in cash. From the analysis of
the transactions of ABM Consultancy, get the sum of P19,100, (P9,100), and
P10,000, respectively. The Net Increase in cash is P20,000. See figure below.

ABM Consultancy Services

Cash Flow Statement
For the month ended June 30, 2020

Cash Flows from Operating

Activities
₱ 5,000
Collection of interest
Collection from customers 35,000
Collection of rent 3,500
Collection of dividends 3,000
Payment of interest (2,000)
Payment of operating expenses (25,400)
Net Cash Flow from Operating Activities 19,100
₱

Cash Flows from Investing Activities

Proceeds from sale of furniture ₱ 8,900
Proceeds of sale of equipment 7,000
Purchase of furniture (25,000)
Net Cash Flow from Investing Activities (9,100)

Cash Flow from Financing Activities

Additional investment ₱ 20,000
Proceeds of bank loan 40,000
Cash withdrawal of the owner (30,000)
Payment of bank loan (20,000)
Net Cash Flow from Financing Activities 10,000
Net Increase (Decrease) in Cash ₱ 20,000
Net Increase (Decrease) in Cash ₱ 20,000
Add: Cash balance, June 1, 2020 0.00
Add: Cash balance, JuneJune
Cash balance, 1, 2020
30, 2020 ₱ 0.00
20,000
Cash balance, June 30, 2020 ₱ 20,000
 6. Add the beginning cash balance to get the cash balance for the end of the
month. There is no beginning cash balance given, so we can already
determine the ending cash balance for ABM Consultancy, P20,000.

Net Increase (Decrease) in Cash ₱ 20,000

Add: Cash balance, June 1, 2020 0.00
Cash balance, June 30, 2020 ₱ 20,000

Below is the acceptable format in the preparation of CFS.

ABM Consultancy Services

Cash Flow Statement
For the month ended June 30, 2020

Cash Flows from Operating Activities

Collection of interest ₱ 5,000
Collection from customers 35,000
Collection of rent 3,500
Collection of dividends 3,000
Payment of interest (2,000)
Payment of operating expenses (25,400)
Net Cash Flow from Operating Activities ₱ 19,100

Cash Flows from Investing Activities

Proceeds from sale of furniture ₱ 8,900
Proceeds of sale of equipment 7,000
Purchase of furniture (25,000)
Net Cash Flow from Investing Activities (9,100)

Cash Flow from Financing Activities

Additional investment ₱ 20,000
Proceeds of bank loan 40,000
Cash withdrawal of the owner (30,000)
Payment of bank loan (20,000)
Net Cash Flow from Financing Activities 10,000
Net Increase (Decrease) in Cash ₱ 20,000
Add: Cash balance, June 1, 2020 0.00
Cash balance, June 30, 2020 ₱ 20,000

The ending cash balance will be the cash balance in the statement financial position.
 What’s In

Are you up for a challenge? Don’t forget the tips mentioned in the discussion.
This will help ease the classification and computation dilemma.
The following data are taken from the records of Fabulous Nails.

Transactions CF Activity +/-

1. Additional investment of Ms. Fab P 30,000
2. Purchase of nail dryer 23,000
3. Paid loan to Island Bank 10,000
4. Cash received on nail service 40,000
5. Paid rent 2,000
6. Paid utilities 2,000
7. Purchase office supplies 2,000
8. Paid salaries of employees 12,000
9. Cash drawings of Ms. Fab 5,000
10.Paid interest 1,000
11.Collection of from customers 15,000

A. Identify the cash flow activity for each transaction, and (+) if it is inflow or (-)
if outflow.

B. Prepare March 31,2020 CFS for Fabulous Nails. Ms. Fab has a beginning
cash balance April 1, 2019 of P 25,000.

s as to operating, investing or financing. Then, put a plus (+), or a minus (-) sign to identify which transactions are inflows or outflows. D
 What’s New

The following are the financial statement of ABM Consultancy. The figure
may look familiar because it was taken from the previous module. However, there
is an additional link to these financial statements to show the relationship among
them, that is the cash flow statement.

ABM CONSULTANCY SERVICES

STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED JUNE 30, 2020
ABM CONSULTANCY SERVICES
Consultancy Fee ₱ 323,000
Other Income Statement of Changes in Equity
Rent Income ₱ 10,000 For the Month Ended June 30, 2020
Dividends Income 6,000
Gain On Sale Of Equipment 12,000 Magaling, Capital, 6/1/20 ₱ 150,000
Interest Income 5,000 33,000 Add: Additional Investments ₱ 20,000
Total Income ₱ 356,000
Net Income 209,000 229,000
Expenses Total ₱ 379,000
Salaries 98,000 Less: Withdrawals 326,000
Rent 10,000 Magaling, Capital, 6/30/20 ₱ 53,000
Depreciation 7,000
Supplies 4,000
Insurance 10,000 ABM CONSULTANCY SERVICES STATEMENT OF FINANCIAL POSITION
Loss On Sale Of Equipment 3,000 As of June 30, 2020
Interest Expense 15,000 147,000
Net Income ₱ 209,000
ASSETS

ABM Consultancy Services

Cash Flow Statement CURRENT ASSETS
For the month ended June 30, 2020 CASH ₱ 20,000
ACCOUNTS RECEIVABLE MERCHANDISE INVENTORY SUPPLIES 10,000
PREPAID RENT PREPAID INSURANCE 150,000
Cash Flows from Operating Activities
TOTAL CURRENT ASSETS 5,000
Collection of interest ₱ 5,000
15,000
Collection from customers 35,000 5,000
Collection of rent 3,500
Collection of dividends 3,000 ₱ 205,000
Payment of interest (2,000)
NON-CURRENT ASSETS
Payment of operating expenses (25,400)
₱19,100 PROPERTY, PLANT AND EQUIPMENT
Net Cash Flow from Operating Activities
SERVICE VEHICLE ₱ 50,000
LESS: ACCUMULATED DEPRECIATION 4,000 46,000
Cash Flows from Investing Activities STORE EQUIPMENT 35,000
Proceeds from sale of furniture ₱ 8,900 LESS: ACCUMULATED DEPRECIATION 6,000 29,000 75 ,000
Proceeds of sale of equipment 7,000 ₱ 280,000
TOTAL ASSETS
Purchase of furniture (25,000)
Net Cash Flow from Investing Activities (9,100)
LIABILITIES and OW NER'S EQUITY CURRENT LIABILITIES

Cash Flow from Financing Activities NOTES PAYABLE ₱ 30,000

Additional investment ₱ 20,000 ACCOUNTS PAYABLE 20,000
Proceeds of bank loan 40,000 SALARIES PAYABLE 10,000
Cash withdrawal of the owner (30,000) UTILITIES PAYABLE 5,000
Payment of bank loan (20,000) INTEREST PAYABLE 7,000
Net Cash Flow from Financing Activities 10,000 UNEARNED REVENUES 5,000
Net Increase (Decrease) in Cash ₱ 20,000 TOTAL CURRENT LIABILITIES ₱ 77,000
Add: Cash balance, beg. June 1, 2020 0.00
Cash balance, end June 30, 2020 ₱ 20,000 NON-CURRENT LIABILITIES
MORTGAGE PAYABLE 150,000

OW NER'S EQUITY
MAGALING, CAPITAL 6/30/2020 53,00?0??
TOTAL LIABILITIES AND OW NERS EQUITY ???
₱ 280,000
 Accomplishing financial statements is a process. SCI’s net income is needed

to accomplish the owner’s equity statement. Meanwhile, ending capital from the

SCE and ending cash flow of CFS are needed to finally accomplish the correct

balance in SFP.

What is It

Identifying and classifying cash transactions is a critical part of preparing a cash

flow statement. But these few takeaways will help you understand the lesson.

 Familiarize yourself with the transactions involving cash whether it is inflow

or outflow.

 Cash Ledger is the record of all cash transactions. They are recorded
chronologically and from there, you can start classifying cash activities.

 There are three classifications of cash flow activity, namely, operating,

investing, and financing. Each classification has both cash inflows and
outflows in them.

 In making the cash flow statement, cash inflows are recorded first followed
by outflows per cash activity.

 For all preparations of financial statements, always follow acceptable formats.

This includes proper heading writing, proper indention, currency sign (Peso
sign), place values (including decimal place if necessary), and clear/legible
writing.
 What’s More

ENRICHMENT ACTIVITY 1

The following data are taken from the records of AinSoft Gaming Corp.

Identify the cash flow activity for each transaction, and write (+) if it is inflow, or (-)

if outflow.

+/-
Transactions CF Activity

1. Additional investment of Mr. Minmin

2. Cash paid to suppliers

3. Rent income

4. Proceeds from sale of equipment

5. Cash paid for advertising

6. Cash drawings

7. Payment of loan to DBPI Bank

8. Interest payment on loan

9. Purchase building

10.Payment of accounts payable

11.Dividend received

12.Collection from customers

13.Paid for utilities

14.Proceeds of bank loan

15.Proceeds from sales of trading securities

ENRICHMENT ACTIVITY 2

The following data are taken from the records of AinSoft Gaming Corp. AinSoft has
beginning cash balance on July 1, 2019, of P 12,345,678.

Prepare cash flow statement for the year ended June 30, 2020.

Transactions

Additional investment of Mr. Minmin P 31,456,789

Cash paid to suppliers 980,000

Rent income 345,678

Proceeds from sale of equipment 567,890

Cash paid for advertising 123,456

Cash drawings 234,000

Payment of loan to DBPI Bank 345,000

Interest payment on loan 45,678

Purchase building 5,678,900

Payment of accounts payable 90,123

Dividend received 23,456

Collection from customers 2,345,000

Paid for utilities 78,900

Proceeds of bank loan 3,345,000

Proceeds from sales of trading securities 789,123

 What I Have Learned

Learning is a give-and-take relationship. It’s your turn to discuss something about

the lesson. Give your simple explanations of the concepts below.

1. What are the operating activities?

2. What are investing activities?

3. What are financing activities?

What I Can Do

Practice makes perfect! Let’s do more!

The following data are taken from the records of Rapsa Pares and Goto. Rapsa has
beginning cash balance on April 1, 2019, of P 24,567.
 Transactions
Additional investment of Mr. Rapsa ₱ 23,000
Cash paid to suppliers 8,000
Rent expense 1,500
Purchase of utensils 3,000
Cash paid for advertising 1,000
Cash drawings 2,500
Payment of loan to Aloha Bank 2,500
Interest payment on loan 700
Interest received on bank savings 1,200
Payment of accounts payable 900
Tax payment 500
Collection from customers 20,000
Paid for utilities 700
Proceeds of bank loan to XYZ Bank 25,000
Bought investment stocks 10,000

Required:
1. Compute for Net Cash Flow from Operating Activities.
2. Compute for Net Cash Flow from Investing Activities.
3. Compute for Net Cash Flow from Financing Activities.
4. Prepare cash flow statement for the year ended March 31, 2020.

Assessment

A. Classify if the following cash transactions is operating, investing, or

financing activity. Write OP for operating, INV for investing, or FIN
for financing.

Transaction CF Activity
1 Payment of operating expenses
2 Collection of interest
3 Collection from customers
4 Payment of interest
5 Collection of rent
6 Purchase of furniture
 7 Additional investment
8 Proceeds of sale of equipment
9 Payment of bank loan
10 Proceeds of bank loan
11 Proceeds from sale of furniture
12 Collection of dividends
13 Cash withdrawal of the owner
14 Paid utilities
15 Purchase office supplies
16 Paid salaries of employees
17 Proceeds from sales of trading securities
18 Interest received on bank savings
19 Payment of accounts payable
20 Tax payment

B. The following data are taken from the records of Mr. Dunkin Bakery. Mr. Baker
has beginning cash balance on January 1, 2018, of P 32,346.

Transactions
Paid for utilities 2,387
Payment of loan to Arina Bank 20,000
Rent expense 3,500
Proceeds of bank loan to Shuga Bank 49,000
Bought investment stocks 10,000
Cash drawings 12,000
Tax payment 1,000
Collection from customers 32,784
Additional investment of Mr. Baker 25,000
Cash paid to suppliers 5,000
Interest payment on loan 1,000
Interest received on bank savings 2,100
Payment of accounts payable 2,000
Purchase of utensils 600
Cash paid for advertising 2,300

Required:

1. Prepare CFS for the year ended December 31, 2019.

 Additional Activities

The following data are taken from the records of AbyGala Events. Ms. Abegail has a
beginning cash balance on January 1, 2020, of P56,908.

A. Complete the table below. Identify if the transactions are for operating,
investing, or financing and put (+) if it is cash inflow. or (-) if outflow.

Transactions CF Activity +/-

1. Additional investment of Ms. Abegail P 34,000
2. Purchase of furniture 23,000
3. Paid loan to Isla Bank 19,000
4. Cash received on events service 40,000
5. Paid rent 3,000
6. Proceeds from sale of stocks 32,500
7. Purchase office supplies 2,000
8. Paid salaries of employees 12,000
9. Cash drawings of Ms. Fab 3,000
10.Paid interest 1,000
11.Collection of from customers 55,000

B. Compute for net cash flow from:

1. Operating activity
2. Investing activity
3. Financing activity
4. Ending cash balance (Dec. 31,2019)
References

Ballada, Win. 2005. Basic Accounting Made Easy. DomDane Publisher & Made

Easy Books.

Ong, Flocer Lao, and Janelle Gomendoza. 2017. Fundamentals of Accounting,

Business and Management 2 for Senior High School. C & E Publishing, Inc.
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