NAME:MICHELLE V.

CABEZO COURSE&SECTION:BSAC 1-B

SELF REFLECTION
1. Define a statement of cash flows.
Statements of cash flows are a useful addition to the financial statements of an
entity because accounting profit is not the only indicator of performance. Statements of
cash Flows show the sources and uses of cash and are a useful indicator of an entity’s
liquidity and solvency.
2. Explain the primary purpose of a statement of cash flows
Cash flow information of a historical nature can be used as an indicator of the
amount, timing and Certainty of future cash flows. The relationship between profit and
cash flows can be analyze as can Changes in cash flows over time. All this information
helps users of accounts make decisions.
3. Define cash.
Cash includes money. It either a cash on hand that refers to coins currencies and
bank drafts. These cash item must be available for the use in current operation. And
also cash in bank .This are the money deposited in a bank which may be saving or
demand deposit.
4. Define cash equivalents.
Cash equivalents are investment that can readily ne converted into cash. The
cash equivalents are short term, and it should be highly liquid investment and have
maturities of three months or less.
5. Give examples of cash equivalents.
Examples of cash equivalents includes commercial paper, treasury bills, and
short-term government bonds
6. What are the three classification of cash flows?
Statements of cash flows show cash flows during the period classified as
operating, investing or financing activities.
The operating activities are primarily derived from the revenue producing
activities of the entity. And it affect the profit or loss, these transaction normally affect
the income statement account
Investing activities involve to the acquisition and disposal of non-current asset
and other investment. In this classification of cash flow the new investment in assets
will generate future profit and cash inflow and cash outflow. And it affect non current
asset and other investment
Financial activities those who effect the entity equity capital and borrowing
structure. Means this is an indicator of likely future interest and dividend payments of
the entity.

7. Explain the treatment of interest paid and interest received in a

statement of cash flows.
Interest expense paid and interest income received will recorded in operating
activities of cash flows
Interest expense paid is usually report In the operating activities of cash flows of
classified in financing cash flow
Interest income received is also reported in operating activities of cash flow or
investing cash flow
8. Explain the treatment of dividends paid and dividends received in the
statement of cash flows.
Dividends paid the financing cash flows on the basis that they represent the cost
of obtaining finance cash flows from operating activities in order to assist users
to determine the ability of an entity to pay dividends from operating cash flows.
Dividends received may be classified as investing cash flows on the basis that
these amounts are returns on investments
9. Explain the treatment of income taxes in a statement of cash flows.
Taxation in cash flows are often difficult to match to the originating underlying
transaction, so usually Tax cash flows are classified as arising from operating activities
10.Explain the direct method and indirect method of reporting cash flows
from operating activities
DIRECT METHOD –shows each major class of gross cash receipt and gross cash
payments. This method is the discloser of information that is not available
elsewhere in the financial statement that could be of use in estimating future
cash flows.
INDIRECT MEHOD- in this method the profit or loss from operations for the
period is adjusted. It has an effect on the non-cash items and it will result to the
changes in the operating of assets and liabilities
  Affect borrowing and equity

ACTIVITY:

STATEMENT OF
CASH FLOW

Cash flow from Cash flow from

operating Cash flow from financial activities
activities investing
•DIRECT METHOD activities
•INDIRECT METHOD

•Cash flows from operating •are the acquisition and disposal

activities are primarily derived from
the principal revenue-producing
activities of the entity.
•include cash inflow and outflows of
items on income and expenses.
•Affect profit or loss
•activities that affect the equity
of long-term assets and other
capital and borrowing structure
investments
of the enterprise
•business units resulting to loss or
•business units that do not to
obtaining of control are classified
loss are classified as financial
as investing activities
activities
•Affect non-current asset and other
investment

CHANGE IN CASH AND

CASH EQUIVALENTS