STATEMENT OF CASH FLOWS

CASH FLOW
Statement of Cash Flow
shows the movement in the
Cash account of a company.
 CASH FLOW Represents

Represents
•Inflows (Receipts)
•Outflows (Payments
or Disbursements)
THREE ACTIVITIES OF CASH FLOWS
•Operating Activities
•Investing Activities
•Financing Activities
 Sections of the SCF
1. Operating activities
✔ The SCI shows a net income computed based on accrual.
On the other hand, SCF shows net cash flows provided by
or used in operating activities.
✔ Examples of cash flow transactions reported under
operating activities are:
a. Cash received from customers (cash receipts from
sale of goods and rendering of services)
b. Cash received from fees, commissions, and other
income
c. Cash payments to suppliers
d. Cash payments to employees
e. Cash payments for other operating expenses
f. Interest payments
 Sections of the SCF
2. Investing activities
✔ Reported within this section are cash used for acquisition of
property, plant and equipment, intangible assets and other long
term assets as well as cash proceeds from the disposals of such
long term assets.
✔ Cash flows from investing activities hints on the company’s
ability to generate cash in the future.
✔ A negative cash flows from investing activities implies that the
company used cash to acquire long-term assets intended to
generate cash and revenue in the future. On the other hand, a
positive cash flow from investing activities may indicate that the
company is divesting or downsizing.
 Sections of the SCF
2. Investing activities
✔ Examples of cash flow transactions reported under investing
activities:
a. Cash payments to acquire property, plant and equipment,
intangibles and other long-term assets.
b. Cash receipts from sale of property, plant and equipment, intangibles and
other long-term assets.
c. Cash loans made to other parties (long term note receivable).
d. Cash collection on long term note receivable.
 Sections of the SCF
3. Financing activities
✔ Cash flow from financing activities is the last section of the SCF.
This section reports cash received and cash paid to equity
owners and long-term creditors.
✔ Examples of cash flow transactions reported under financing
activities:
a. Cash received from issuing common shares (or capital
contribution from owners).
b. Cash received from issuing notes or getting a long term
loan from a bank.
c. Cash dividends distributed to shareholders.
d. Cash withdrawals of owners.
e. Cash payment for principal of long-term loan.
 OPERATING ACTIVITIES
Main operations of the company
•professional services
•acquisition of inventories and supplies
•selling of inventories for merchandising and manufacturing
concerns
•collection of accounts
• payment of accounts to suppliers
Cash inflows (proceeds) from operating
activities include:
• Cash receipts from sales of goods and services including receipts from
collection of accounts receivable and both short/long-term notes
receivable from customers and students arising from those sales
• Cash receipts from quasi-external operating transactions with other
funds
• Grant receipts for activities considered as operating activities of the
grantor government
• Cash receipts for reimbursement of operating transactions
• Cash receipts from collection of program loans
Cash outflows (payments) from operating
activities include:
• Cash payments to suppliers of goods and services
• Cash payments to employees for services including benefits
• Cash payments for grants considered to be operating activities of the
grantor
• Cash payments for quasi-external operating transactions (including
payments in lieu of taxes)
• Cash payments for program loans
 INVESTING ACTIVITIES
"where the company puts its money for long-term purposes“
•Acquisition of property, plant and
equipment
•Investment in long term securities
Cash inflows (proceeds) from investing
activities include:
• Receipts from collections of loans (except program loans) and sales of
other entities’ debt instruments (other than cash equivalents)
• Receipts from sales of equity instruments and from returns of
investment in those instruments
• Receipts of interest and dividends received as returns on loans
(except program loans), debt instruments of other entities, equity
securities and cash management or investment pools
• Receipts from withdrawals on investment pools the governmental
enterprise is not using as demand accounts
Cash outflows (payments) for investing
activities include:
• Payments for loan disbursements (except program loans) and
acquisition of debt instruments of other entities
• Payments to acquire equity instruments
• Payments for deposits into investment pools the governmental
enterprise is not using as demand accounts
 FINANCING ACTIVTIES

"where the company gets its funds”

•investment of the owner/s
•cash proceeds from bank loan and other
long-term payables
Cash inflows (proceeds) from financing
activities include:
• Receipts from proceeds of issuing or refunding bonds and other short
or long-term borrowings used to acquire, construct or improve capital
assets
• Receipts from capital grants awarded to the governmental enterprise
or other contributions for capital assets
• Receipts from contributions made by other governments,
organizations or individuals (gifts) for the specific purpose of
defraying the cost of acquiring, constructing or improving capital
assets
Cash inflows (proceeds) from financing
activities include:
• Receipts from sales of capital assets and proceeds from insurance on
capital assets that are stolen or destroyed
• Receipts from special assessments or property and other taxes levied
for capital purposes
• Cash receipts from short and long-term borrowings used for purposes
other than to acquire, construct or improve capital assets
• Cash receipts from grants and voluntary non-exchange transactions
(gifts) not used for capital assets or for specific activities considered
to be operating activities of the grantor
Cash inflows (proceeds) from financing
activities include:
• Cash receipts from other funds except amounts used for capital
assets, quasi-external operating transactions or reimbursement for
operating transactions
• Cash receipts from property and other taxes not specifically restricted
for capital purposes
• Cash receipts from proceeds of state appropriations
 Ren Ren Merchandising started a business. Write the
cash flow activity for each of the following transactions.
TRANSACTIONS AMOUNT
Additional Investment in the business P 22,200
Proceeds of sale equipment 15,000
Collection of interest 9,000
Collection from customers 315,800
Proceeds of bank loan 200,000
Proceed from sale of furniture 8,000
Payment of operating expenses 145,000
Collection of dividends 12,000
Cash Withdrawal of owner 30,000
Payment of Interest 6,000
Collection of rent 30,000
Purchase of furniture 31,000
Payment of bank loan 150,000
Cash Balance, Beginning 200,000
 OPERATING INVESTING FINANCING
RECEIPTS RECEIPTS RECEIPTS
∙ Collections from ∙ Proceeds from sale ∙ Additional
Customers of equipment Investment of
∙ Rent Income ∙ Proceeds from sale owner
∙ Dividends Income furniture ∙ Proceeds of bank
∙ Interest Income PAYMENTS loan
PAYMENTS ∙ For purchase of PAYMENTS
∙ Operating Expenses furniture ∙ Cash Withdrawal of
∙ Interest Expense owner
∙ Payment of bank
loan
The following data are taken from the records of
Juan to Go Sales. Write each cash flow activity for
each of the following transactions.
Transactions Amount
Additional investment of Mr. Juan P 200,000
Purchased transportation equipment 120,000
Paid loan to Philippine Bank 30,000
Cash sales 50,000
Paid rent for the month 23,000
Paid utilities for the month 8,000
Purchased office supplies 2,000
Paid insurance for the year 20,000
Cash withdrawal of Mr. Juan 15,000
Paid employees salaries 65,000
Cash Balance, Beginning 150,000
 Mr. Carlo Raulo established a consultancy firm. The following
data are taken from the records of C. Raulo Consultancy for
the year 2017.
Based on the below information, Compute for the Net Cash
Provided by Operating Activities on the cash flow statement.
Answer:
Based on the below information, Compute for the Net Cash
Provided by Operating Activities on the cash flow statement.
Answer: