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Quarter 1 – Module 5:
Cash Flow Statement
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Subject Area – Grade 12
Self-Learning Module (SLM)
Quarter 1 – Module 5: Cash Flow Statement
First Edition, 2020
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Fundamentals of
Acccountancy
Business and
Management 2
Quarter 1 – Module 5:
Cash Flow Statement
SELF-LEARNING MODULE
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Introductory Message
For the facilitator:
This module was collaboratively designed, developed and reviewed by educators both
from public and private institutions to assist you, 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.
In addition to the material in the main text, you will also see this box in the body of
the module:
As a facilitator you are expected to orient the learners on how to use this 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.
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For the learner:
The hand is one of the most symbolized part of the human body. It is often used to
depict skill, action and purpose. Through our hands we may learn, create and
accomplish. Hence, the hand in this learning resource signifies that you as a learner
is capable and empowered to successfully achieve the relevant competencies and
skills at your own pace and time. Your academic success lies in your own hands!
This module was designed to provide you with fun and meaningful opportunities for
guided and independent learning at your own pace and time. You will be enabled to
process the contents of the learning resource while being an active learner.
What I Need to Know This will give you an idea of the skills or
competencies you are expected to learn in the
module.
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Assessment This is a task which aims to evaluate your
level of mastery in achieving the learning
competency.
1. Use the module with care. Do not put unnecessary mark/s on any part of the
module. Use a separate sheet of paper in answering the exercises.
2. Don’t forget to answer What I Know before moving on to the other activities
included in the module.
3. Read the instruction carefully before doing each task.
4. Observe honesty and integrity in doing the tasks and checking your answers.
5. Finish the task at hand before proceeding to the next.
6. Return this module to your teacher/facilitator once you are through with it.
If you encounter any difficulty in answering the tasks in this module, do not
hesitate to consult your teacher or facilitator. Always bear in mind that you are
not alone.
We hope that through this material, you will experience meaningful learning and
gain deep understanding of the relevant competencies. You can do it!
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What I Need to Know
This module was designed and written with you in mind. It is here to help you master
the Cash Flow Statement. The scope of this module permits it to be used in many
different learning situations. The language used recognizes the diverse vocabulary
level of students. The lessons are arranged to follow the standard sequence of the
course. But the order in which you read them can be changed to correspond with
the textbook you are now using.
After going through this module, you are expected to:
What I Know
Now let me refresh your memories about your past lessons by watching these video
tutorials. (https://www.youtube.com/watch?v=PGFSZuJI27s
https://www.youtube.com/watch?v=LqYW-7UhO64).
However, for those of you who don’t have access to internet, here are some examples
of the previous lessons.
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Non - Current
Prepaid Expenses Liabilities
43,000
Total Current Assets Loan Payable 138,000
823,000
Total Liabilities P 1,338.000
Noncurrent Assets
Owner’s Equity
Equipment
2,800,000
Less: Accumulated Angel Reyes,
Depreciation Capital
150,000 2,135,000
Net Equipment 2,650,000
Total Assets P3,473,000 Total Liabilities & OE P3,473,000
Income Statement
3,892,000
Add: Freight in
206,000 4,098,000
Total Goods Available for sale
4,826,000
Less: Merchandise 4,016,000
Inventory,12/31 810,000
Gross Profit 4,742,000
Less: Selling & Admin Expense
Salaries Expense 1,218,000
Rent Expense 600,000
Utilities Expense 840,000
Bad debts Expense 116,000
Depreciation Expense 50,000
Transportation Expense 360,000
Insurance Expense 60,000
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Supplies Expense 240,000
Taxes Expense 180,000 3,664,000
Net Income P1,078,000
Pre Test
Direction: Read each sentence carefully and determine whether the statement is
True or False. Write your answer on the space provided before the
number. However, questions 11-15 is a multiple choice test. Encircle the
letter of the correct answer.
__________1. The SFP provides readers with the information as to the company’s
financial position as of a specified date.
__________2. Asset = Liabilities + Owner’s Equity is the governing equation of the
SFP.
__________3. Asset is an element of the SFP that has a normal credit balance.
__________4, Debit means to increase an account.
__________5. T-account is a representation of the general ledger account used in
teaching accounting.
__________6. An entry on the opposite side of the normal balance of an account
means to decrease the account by the amount entered.
__________7. The normal balance of liabilities and equity is credit.
__________8. Credit means to decrease an account.
__________9. The normal balance of Notes Receivable is debit.
_________10. The normal balance of unearned income is debit.
11. Which of the following financial statements reflect the financial condition of the
company as of given date?
a. income statement c. statement of changes in equity
b. balance sheet d. cash flow statement
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12. Which of the following financial statements reflect the operating performance of
the company?
a. income statement c. statement of changes in equity
b. balance sheet d. cash flow statement
14. Which of the following financial statements are to be closed to zero every end of
the period.
a. income statement c. statement of changes in equity
b. balance sheet d. cash flow statement
15. Which of the following financial statements provides information about the
changes in cash for a specified period?
a. income statement c. statement of changes in equity
b. balance sheet d. cash flow statement
Lesson
In the previous lesson, we learned the three basic financial statements which are
Balance Sheet, Income Statement and Statement of Changes in Equity. In this
module, you are required to discuss the components and structure of a Cash
Flow Statement and eventually prepare a Cash Flow Statement. Here we go……
What’s In
Cash is the first line item in the balance sheet under current asset classification. It
is readily available to finance the current business operations. It has a normal DEBIT
balance.
The illustrations below are common cash transactions that would affect its value to
increase (sources) or decrease (uses) under normal business operation. Figures 1 and
2 are all assumed amount presented in a journal entry format.
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CASH
Journal Entry/
Transactions Particulars Debit Credit
1. Contribution or investment CASH Php100,000
from owners MR. COVEY,
CAPITAL 100,000
# investment
by owners
2. Proceeds from borrowings CASH 500,000
BANK LOAN
PAYABLE 500,000
# borrowed
money from
the bank
#Cash sales
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6. Cash receipts from royalties, CASH 50,000
commission and other
revenues COMMISSION 50,000
INCOME
#receipt of
commission
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What’s New
Direction: In a one whole sheet of paper, list down your Monthly CASH Allowance
from your parents (this should be computed on a daily basis to be multiplied
by the number of days in a month). Write down also your liabilities from
your classmates and friends including your daily expenses for food,
transportation and all other expenses you had spent for a month. Deduct
your monthly liabilities and expenses from your allowance. Get the
difference and share it on with your classmates.
Oh that’s great! Whatever amount you derived at, represents your daily allowance
and expense. Your allowance represents “sources of fund” while your expenses
and debts represent “uses of fund”. Combining all together in a T- account format
this is what your activity should be looked like.
Before we proceed with our main topic, I have here processing questions for you
to answer. Write your answers on the space provided below;
1. How much amount you raised from your daily allowance and from your daily
expenses?
2. As a point of reference with our previous lessons, what does your allowance
and expense do represent?
3. What significant amount you came across after deducting expenses from your
allowance? Can you explain the importance of this figure to you as an ABM
student?
4. Discuss any significant inputs in this activity that connects your prior learning
with that of our current lesson?
1. _____________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
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_____________________________________________________________________________
2. _____________________________________________________________________________
_____________________________________________________________________________
______________________________________________________________________________
3. ______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
4. ________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
You’ve just shared your personal thoughts and experiences with the recent activity.
At this juncture you are now ready to explore Cash Flows.
What is It
Discussion
NOTA BENE: 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
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1. Direct – The operating cash flow section of the CFS under the direct method will
show each major class of gross cash receipts and gross cash payments
(Deloitte Global Services Limited, 2015).
2. Indirect – The operating cash flow section of the CFS under the indirect method
will reconcile with 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 (Deloitte Global Services
Limited, 2015).
Both approach will yield the same amount of cash flows from Operating
activities. Investing and Financing sections of the CFS will yield the
same results under both approach.
1. 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 (Deloitte
Global Services Limited, 2015).
4. Beginning Cash Balance – The balance of the cash account at the beginning of
the accounting period.
5. 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.
Major activities were presented in bold fonts to remind you of their distinctive
classification. The first two syllables on the third row title part was written in bold
font to remind your attention about its importance.
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Example: DIRECT APPROACH
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Proceeds from sale 30,000
Under Indirect approach, the operating activity starts with Net Income and it
will be adjusted with its non-cash items such as depreciation.
Any gain or loss accounts i.e. Loss on sale of equipment as the case maybe and
other adjustments of account under accrual concept of income and expense
recognition shall also be adjusted against net income. Take note that whatever
approach you are using you will still arrive at the same answer in both
approaches.
Here are important notes for you to remember in solving indirect approach to
cash flow problems.
• Non-cash expenses are added back while non-cash revenues are deducted.
Gain/loss on sale of non-current assets are deducted/added back because
the cash transaction is recorded under investing activities.
• Changes in current assets and current liabilities are either added or deducted
Depending on whether they increased or decreased during the year.
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• Accounts Payable – increases expenses which decreases net income but is not
a cash transaction
• Unearned Income – increases cash but does not change the net income
• Accounts Payable – decreases cash but does not change the net income
• Unearned Income – increases revenue which increases net income but is not
a cash transaction
Therefore:
Therefore:
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Example:
Direction: From this T-account for cash, classify all activities as to operating,
investing and financing activities. I am guiding you through this
presentation for clarity and guidance.
Cash in Bank
Step 1- Group all the debits (fund sources) and label it according to its activity.
Step 2- Group all the credits (uses & applications) of funds according to activity.
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Step 3- Get the difference between our debit and credit in order to get our ending
cash balance. In this example our ending cash balance is P1,876,500-
1,218,320 = P658,180.
Step 4- Combined the debit (source) and the credit (use) of the same activity. Indicate
the negative sign ( ) for all uses or application of funds for that activity.
Step 5- At this point you are now ready to prepare your cash flow statement.
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What’s More
Congratulations! You have just finished your drill in direct approach cash flow
statement. Similarly, we will have a brief review on our theories by answering the
quizzer below;
_________1. Gain on sale of property and equipment is part of what activity in the
Cash Flow Statement
_________2. Changes in long term liabilities is part of what activity in the Cash
Flow Statement?
_________3. Net income is part of which Approach in preparing the Cash Flow
Statement?
_________4. The company presented the following in order to aid the accountant
in preparing the Cash Flow Statement:
Questions 5-10 are based on the given data below. (Prepare a Cash Flow Statement
using Indirect Approach.
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Activity 3. “Let’s Classify”
Direction: Prepare a cash flow statement from the given test below. You are required
to pass your solution on problem solving cases. You may use a separate
sheet of paper for your answer. Good luck!
1. Identify which of the following transactions fall under operating, investing and
financing activities:
Answers
a. Cash received from customers
b. Cash paid to suppliers
c. Cash paid to employees
d. Cash paid to purchase equipment (company does
not sell equipment)
f. Depreciation expense
g. Sale of goods on credit
2. Juana’s sari-sari store had the following transactions during the year:
Required: Compute for the net cash flow generated by/used in operating
activities
3. Using the given information above, compute the net cash flow generated
by/used in investing activities.
4. Using the given information above, compute the net cash flow generated
by/used in financing activities.
5. Using the given information above, prepare a Cash Flow Statement of Juana
as of December 31, 2019
Alright you have been surpassing with most of your test drills. I think you are
now ready to take onto the next level. Come on let’s go!
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What I Have Learned
Cash Flow Statement provides the net change in cash balance of a company for
a given period.
Now, let us summarize our lesson from the very start by answering the following
questions below.
Direction: This is an Independent Practice test. On the fourth column you will answer
whether an account given is increasing or decreasing. Your baseline year
is 2018. On the fifth column you classify every account as to operating,
investing and financing activity.
Increase
2019 2018 (Decrease) Activity
Cash P 160 P 340
Account Receivable 430 390
Allowance for Bad Debts ( 10) ( 15)
Merchandise Inventory 500 540
Land 2,100 2,000
Equipment 1,300 1,100
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Activity 5: Let’s apply what you learned!
Direction: True or False. Read each sentence carefully and determine whether the
statement is True or False. Write your answer on the space provided
before each number.
________ 1. The statement of Cash Flows show 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 Statement of
Comprehensive Income will most likely be equal to the cash received
from customer reported in the Statement of Cash Flows.
_________4. Payments for the acquisition of merchandise inventory are reported as
investing activities.
_________5. Statement of Cash Flows 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 Statement of Cash Flows.
_________7. Salaries and utility payment are reported as operating activities.
_________8. Non-Cash expenses such as depreciation and amortization are
deducted from net income to arrive at the cash flows from operating
activities.
_________9. A negative cash flow from investing activities 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
in the Statement of Financial Position.
Direction: From the line items in the box, prepare a pro forma statement of cash
flows. Classify the line items as to operating, investing, and financing
activities. Indicate whether an activity is a plus or minus
Investing
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Financing
What I Can Do
Let’s do it!
Now, it’s time for you to apply what you have learned from your lesson about CASH
FLOW STATEMENT. Are you now ready? Then, let’s begin!
Direction: Given the data below, you are to prepare a Cash Flow Statement of
Covey19 Corporation highlighting its operating, investing and financing
activities. You prove that Covey 19 Corp cash balance is being reconciled
with its cash balance at the end of the period. Use an 8 column worksheet
for your answers and solutions. Staple and attach your answer to the
Module.
Covey 19 Corporation
The cash account of Covey 19 has a beginning balance of P129,937.50. Its year-
end balance stands at P254,925. The table below show the summarized
transactions from the account of Covey19 Company. (60 minutes)
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Assessment
Kudos! You have done this far…. Let’s see what’s in store for you with our lesson at
hand. Now, I want you to read the instruction carefully and answer what is being
asked?
Direction: On the space provided, indicate whether the items are categorized as
operating, financing and investing activity. Use + (plus sign) if the item
represents cash inflows and – (minus sign) if it represents cash outflows.
Direction: Shown below is the general ledger of cash account broken down as
follows; Prepare a Statement of Cash Flows for the year ended. Cash
Balance beginning January 1, 2018 is P60,0000. Use a separate
worksheet for your answer.
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Additional Activities
Congratulations! You made it until the end of our lesson. I know you’ve learned so
much about Cash Flows. Now, for your additional activities, do this tasks at home.
Direction: Determine the net cash flow from operating, investing and financing
activities for the year ended December 31, 2019
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What I Know What's More Assessment
1. true 1. operating 1. operating
2. true 2. financing 2. financing
3. false 3. indirect 3. financing
4. false 4. 225,000 4. investing
5. true 5. 325,000 5. investing
6. true 6. 395,000 6. operating
7. true 7. 200,000 7. financing
8. false 8. 150,000 8. operating
9. true 9. operating
9. 45,000
10.false 10.financing
10. Bonus
11.b
12.a 11. 395,000
13.b 12. 45,000
14.a 13. 655,000
Activity8
15.d 14. bonus
15. 700,000
Pre Test
Activity 2
Answer Key
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What I have learned What I have What I have
Operating learned learned
• Net cash flows used
from operating Operating 1. true
activities (P27,000) • Cash received from 2. false
Investing customers (+) 3. true
• Net cash flows used • Payment to suppliers 4. false
from investing (-)
activities (P60,000)
• Payment of salaries (-)
Financing What can I Do?
• Utilities paid (-)
• Net cash flows 1 Net cash flows from
provided from • Depreciation/
operating activity =
financing activities Amortization (-)
P345,785
(P300,000) Investing
2. Net Cash flows from
Net increase in cash • Payment for the investing activities
P213,000 acquisition of equpt
Cash Balance, beginning =(P203,362.50)
(-) 3. Net cash flows from
P 60,000 • Cash received from
Cash balance, end financing activities=
sale of land (+) (P17,435)
P273,000
Financing 4. Net increase in Cash
• Cash contribution =P124,987.50
from owners (+) 5. Cash Balance,
• Payment of bank beginning =
Activity 9 loan (-) P129,937.50
• Cash drawings (-) 6. Cash Balance, end
• Interest paid (-) P254,925
Activity 6
Activity# 7
What’s More What I have What I have
01a. operating learned learned
02b. operating
1. true 1. true
03c. operating
2. false 2. false
04d. investing
3. true 3. true
05e. investing
4. false 4. false
06f. operating
5. true 5. true
07g. operating
6. false 6. false
08h. operating
7. true 7. true
09i. financing
8. false 8. false
10j. financing
9. false 9. false
02. 10,000
10. true 10. true
03 100,000
04. ( 10,000)
05. 100,000
Activity 3
Activity 5 Activity 5
References
Books:
Internet Sources
https://www.youtube.com/watch?v=PGFSZuJI27s
https://www.youtube.com/watch?v=LqYW-7UhO64
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DISCLAIMER
This Self-learning Module (SLM) was developed by DepEd – Division of General
Santos City with the primary objective of preparing for and addressing the
new normal. Contents of this module were based on DepEd’s Most Essential
Learning Competencies (MELC). This is a supplementary material to be used
by all learners in General Santos City in all public schools beginning SY 2020-
2021. The process of LR development was observed in the production of this
module. This is version 1.0. We highly encourage feedback, comments, and
recommendations.
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