SENIOR

Entrepreneurship HIGH
SCHOOL

Module
Cash Flow Statement (CFS) 16
Quarter 2

Entrepreneurship
Quarter 2 – Self-Learning Module 16: Cash Flow Statement (CFS)
First Edition, 2020

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 SENIOR
Entrepreneurship HIGH
SCHOOL

Self-Learning
Module

16
Quarter 2

Cash Flow Statement (CFS)

Introductory Message

For the facilitator:

Welcome to the Entrepreneurship with Grade 12 Self-Learning Module on Cash Flow

Statement and reviewed by educators from the Schools Division Office of Pasig City
headed by its Officer-in-Charge Schools Division Superintendent, Ma. Evalou
Concepcion A. Agustin, in partnership with the City Government of Pasig through its
mayor, Honorable Victor Ma. Regis N. Sotto. The writers utilized the standards set
by the K to 12 Curriculum using the Most Essential Learning Competencies (MELC)
in developing this instructional resource.
This learning material hopes to engage the learners in guided and independent
learning activities at their own pace and time. Further, this also aims to help learners
acquire the needed 21st century skills especially the 5 Cs, namely: Communication,
Collaboration, Creativity, Critical Thinking, and Character 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:

Notes to the Teacher

This contains helpful tips or strategies that
will help you in guiding the learners.

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. Moreover, you are expected to encourage and assist the
learners as they do the tasks included in the module.
 For the Learner:

Welcome to the Entrepreneurship Self-Learning Module on Career Opportunities

for Entrepreneurship!
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 material while being an active
learner.

This module has the following parts and corresponding icons:

Expectations – These point to the set of knowledge and skills

that you will learn after completing the module.

Pretest - This measures your prior knowledge about the lesson

at hand.

Recap - This part of the module provides a review of concepts

and skills that you already know about a previous lesson.

Lesson - This section discusses the topic in the module.

Activities - This is a set of activities that you need to perform.

Wrap-Up - This section summarizes the concepts and

application of the lesson.

Valuing - This part integrates a desirable moral value in the

lesson.

Posttest - This measures how much you have learned from the
entire module.
 EXPECTATIONS

LEARNING OBJECTIVES: After going through this module, you are expected to:
1. identify the parts of the cash flow statement;
2. classify cash transactions; and
3. prepare a cash flow statement.

PRETEST

Directions: Identify the words described in the following statements. Choose your
answer from the box

A. Direct Approach D. Indirect Approach

B. Cash Flow Statement E. Financing Activities
C. Investing Activities F. Operating Activities

_____ 1. Cash transactions related to changes in equity and borrowings of the

business. Examples are the sale of the company shares, the repurchase of
shares, and dividend payments.
_____ 2. This method requires to present cash flow information that is directly
associated with the items triggering the cash flow.
_____ 3. Provides an analysis of inflows and/or outflows of cash from/to
operating, investing, and financing activities
_____ 4. Activities that constitute the revenue-producing activities of the
company such as cash from customers and cash paid to suppliers, payroll
(salary of employees), royalties, commission, fines, lawsuits, supplier, lender
invoices
_____ 5. This method begins with the net income or loss reported on the
company’s income statement and then makes a series of adjustments to this
figure to arrive the amount of net cash provided by the operating activity
 RECAP
Directions: Classify the following if it is Asset, Liabilities or Equity.

Capital mortgage payable

Land taxes

A Loan with a bank Cash Receivables

Rent Withdrawal
Office Equipment Trademark

ASSET LIABILITIES EQUITY

LESSON

1. How much is your monthly allowance? (allowance per day x 20days)

2. How much do you spend on Food? Transportation? Other expense?
3. How much is your total Expense?
When you deduct the number of your expenses to your monthly allowance there
might be some cases that the result is zero. In business, we have what we called
Cash Flow. This includes all the cash items. In our example, your allowances are the
inflows and your expenses are the outflows.
CASH FLOW STATEMENT – Provides an analysis of inflows and/or outflows of cash
from/to operating, investing, and financing activities (Deloitte Global Services
Limited, 2015). This statement shows CASH TRANSACTIONS ONLY.

Cash is a precious commodity that will make the enterprise live on and on. It
is crucial, therefore, to monitor and budget the enterprise’s cash position on a daily,
monthly, and yearly basis.

The entrepreneur or finance manager should determine the Cash Receipts

and Cash Disbursement that the enterprise is most likely to experience. If there
are projected surpluses or shortages, these should be added to Beginning Cash
Balance to determine the Ending Cash Balance. If the ending cash balance turns
out to be positive and stays above the minimum cash required, there is no need to
raise funds. Excess cash can then be placed in marketable securities or other forms
of investments. If the ending cash balance is negative, then there is a need to borrow
short-term funds for seasonal requirements or borrow long-term funds for long-term
requirements. The nature of the cash needs can be established by forecasting the
cash situation over a longer timeframe.

Example of the Actual Cash Flow Statement from My T-Shirt Company

My T-Shirt Company
Projected Cash Flow for Years 1-5
Year 1 Year 2 Year 3 Year 4 Year 5
Beginning Cash Balance 49,700.00 67,005.60 139,983.20 220,385.52 308,959.24
Cash Inflows
Cash Sale 785,760.00 864,340.00 950,710.00 1,045,730.00 1,150,320.00
Total Cash Inflows 785,760.00 864,340.00 950,710.00 1,045,730.00 1,150,320.00
Cash Out Flows
Payroll 156,000.00 171,600.00 188,760.00 207,636.00 228,399.60
Supplies 412,800.00 454,080.00 499,488.00 549,437.00 604,380.00
Taxes & Licenses 1,500.00 1,500.00 1,500.00 1,500.00 1,500.00
Utility & Telephone 9,600.00 10,560.00 11,616.00 12,778.00 14,055.00
Other (Tax) 69,427.20 76,371.20 83,987.84 92,370.24 101,612.80
Subtotal 649,327.20 714,111.20 785,351.84 863,721.24 949,947.40
Other Cash Out Flows
Loan Principal
Owner's Draw 119,127.20 77,251.20 84,955.84 93,435.04 102,724.08
Subtotal 119,127.20 77,251.20 84,955.84 93,435.04 102,724.08
Total Cash Outflows 768,454.40 791,362.40 870,307.68 957,156.28 1,052,671.48
Ending Cash Balance 67,005.60 139,983.20 220,385.52 308,959.24 406,607.76

PARTS OF CASH FLOW STATEMENT

Operating Activities – Activities that constitute the revenue-producing activities of

the company such as cash from customers and cash paid to suppliers, payroll (salary
of employees), royalties, commission, fines, lawsuits, supplier, lender invoices

Investing Activities – Cash transactions related to the purchase of non-current

assets or long-term assets, as well as cash received from their sale. Examples of the
investing activities are the purchase of a fixed asset (equipment, land, etc.) and
purchase or sale of securities issued by other entities.

Financing Activities – Cash transactions related to changes in equity and

borrowings of the business. Examples are the sale of the company shares, the
repurchase of shares, and dividend payments.

Beginning Cash Balance – The balance of the cash account at the beginning of the
accounting period.

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.
The importance of the Cash Flow Statement is that it provides the net change in the
cash balance of a company for a period. This helps owners see if their revenues are
translated to cash collections or if they have enough cash inflows to pay any maturing
liabilities.

This is an example of a cash flow statement from a Blue Moon company. The example
cash flow shows an example of a direct approach.

BLUE MOON COMPANY

Cash Flow Statement
For the year ending December 31, 20xx
Cash Flow Operating Activities
Cash receipt from the customers xxxxxx
Cash paid to suppliers and employees (xxxxxx)
Net Cash provided by operating activities xxxxxx

Cash flow from investing activities

Proceeds from sale of equipment xxxxxx
Net Cash provided by investing activities (xxxxxx)
Legal Services xxxxxx

Cash flow from financing activities

Proceeds from the sale of equipment xxxxxx
Cash paid for dividends (xxxxxx)
Net Cash provided by financing activities xxxxxx

Net increase in cash xxxxxx

Cash balance at January 1,20xx xxxxxx
Cash balance at December 31,20xx xxxxxx

A. Receipts from customers are derived from the following formula:

𝐸𝑛𝑑𝑖𝑛𝑔 𝐴𝑐𝑐𝑜𝑢𝑛𝑡𝑠 𝑅𝑒𝑐𝑒𝑖𝑣𝑎𝑏𝑙𝑒 = 𝐵𝑒𝑔𝑖𝑛𝑛𝑖𝑛𝑔 𝐴𝑐𝑐𝑜𝑢𝑛𝑡𝑠 𝑅𝑒𝑐𝑒𝑖𝑣𝑎𝑏𝑙𝑒 + 𝑁𝑒𝑡 𝑆𝑎𝑙𝑒𝑠 – 𝐶𝑜𝑙𝑙𝑒𝑐𝑡𝑖𝑜𝑛𝑠

Therefore:

𝐶𝑜𝑙𝑙𝑒𝑐𝑡𝑖𝑜𝑛𝑠 (𝑟𝑒𝑐𝑒𝑖𝑝𝑡𝑠 𝑓𝑟𝑜𝑚 𝑐𝑢𝑠𝑡𝑜𝑚𝑒𝑟𝑠)

= 𝐵𝑒𝑔𝑖𝑛𝑛𝑖𝑛𝑔 𝐴𝑐𝑐𝑜𝑢𝑛𝑡𝑠 𝑅𝑒𝑐𝑒𝑖𝑣𝑎𝑏𝑙𝑒
+ 𝑁𝑒𝑡 𝑆𝑎𝑙𝑒𝑠 𝑜𝑟 𝑁𝑒𝑡 𝑅𝑒𝑣𝑒𝑛𝑢𝑒 – 𝐸𝑛𝑑𝑖𝑛𝑔 𝐴𝑐𝑐𝑜𝑢𝑛𝑡𝑠 𝑅𝑒𝑐𝑒𝑖𝑣𝑎𝑏𝑙𝑒

B. Payments to Suppliers and Employees is derived from the following formula:

𝐸𝑛𝑑𝑖𝑛𝑔 𝐴𝑐𝑐𝑜𝑢𝑛𝑡𝑠 𝑃𝑎𝑦𝑎𝑏𝑙𝑒 𝑎𝑛𝑑 𝐸𝑛𝑑𝑖𝑛𝑔 𝐴𝑐𝑐𝑟𝑢𝑒𝑑 𝑆𝑎𝑙𝑎𝑟𝑖𝑒𝑠 𝐸𝑥𝑝𝑒𝑛𝑠𝑒

= 𝐵𝑒𝑔𝑖𝑛𝑛𝑖𝑛𝑔 𝐴𝑐𝑐𝑜𝑢𝑛𝑡𝑠 𝑃𝑎𝑦𝑎𝑏𝑙𝑒 + 𝐵𝑒𝑔𝑖𝑛𝑛𝑖𝑛𝑔 𝐴𝑐𝑐𝑟𝑢𝑒𝑑 𝑆𝑎𝑙𝑎𝑟𝑖𝑒𝑠 𝐸𝑥𝑝𝑒𝑛𝑠𝑒
+ 𝑁𝑒𝑡 𝑃𝑢𝑟𝑐ℎ𝑎𝑠𝑒𝑠 + 𝑆𝑎𝑙𝑎𝑟𝑖𝑒𝑠 𝐸𝑥𝑝𝑒𝑛𝑠𝑒 − 𝑃𝑎𝑦𝑚𝑒𝑛𝑡𝑠

Therefore:

𝑃𝑎𝑦𝑚𝑒𝑛𝑡𝑠 = 𝐵𝑒𝑔𝑖𝑛𝑛𝑖𝑛𝑔 𝐴𝑐𝑐𝑜𝑢𝑛𝑡𝑠 𝑃𝑎𝑦𝑎𝑏𝑙𝑒 + 𝐵𝑒𝑔𝑖𝑛𝑛𝑖𝑛𝑔 𝐴𝑐𝑐𝑟𝑢𝑒𝑑 𝑆𝑎𝑙𝑎𝑟𝑖𝑒𝑠 𝐸𝑥𝑝𝑒𝑛𝑠𝑒

+ 𝑁𝑒𝑡 𝑃𝑢𝑟𝑐ℎ𝑎𝑠𝑒𝑠 + 𝑆𝑎𝑙𝑎𝑟𝑖𝑒𝑠 𝐸𝑥𝑝𝑒𝑛𝑠𝑒 − 𝑃𝑎𝑦𝑚𝑒𝑛𝑡𝑠
THE DIRECT AND INDIRECT APPROACH OF THE CASH FLOW STATEMENT

There are two ways in which to present the statement of cash flows, which are
the direct and indirect methods.

Direct Approach – The operating cash flow section of the Cash Flow Statement
under the direct method would show each major class of gross cash receipts and
gross cash payments (Deloitte Global Services Limited, 2015).

The direct approach requires to present cash flow information that is directly
associated with the items triggering the cash flow

Indirect Approach – The operating cash flow section of the CFS under the indirect
method will reconcile the net income/loss of the company with the total cash flows
generated/used in operating activities by adjusting the net income/loss for the
effects of non-cash transactions (Deloitte Global Services Limited, 2015).

The indirect approach begins with the net income or loss reported on the
company’s income statement, and then makes a series of adjustments to this figure
to arrive the amount of net cash provided by the operating activity

Note that these two approaches will just yield in the same amount of cash flow
from operating activities.

BLUE MOON COMPANY

Cash Flow Statement (Direct Approach)
For the year ending December 31, 20xx
Cash Flow Operating Activities
Cash receipt from the customers ₱ 45,100
Cash paid to suppliers and employees (₱ 36.600)
Net Cash provided by operating activities ₱ 8,500

Cash flow from investing activities

Proceeds from sale of equipment ₱29,300
Net Cash provided by investing activities (₱ 26,600)
Legal Services ₱ 2,700

Cash flow from financing activities ₱ 6,000

Proceeds from the sale of equipment (₱ 10,000)
Cash paid for dividends (₱ 4,000)
Net Cash provided by financing activities

Net increase in cash ₱7,200

Cash balance at January 1,20xx ₱ 11,300
Cash balance at December 31,20xx ₱ 18,500

ACTIVITIES
Activity 1: Matching Type
Directions: Match the parts of the cash flow statement in Column A with its
definition in Column B.
A B
1. Operating Activities
2. Investing Activities
3. Financing Activities
4. Beginning Cash Balance
5. Ending Cash Balance
Activity 2
Directions: Identify which of the following transactions fall under the following
categories of a cash flow
A. Operating, B. Investing,
______________________1.
______________________2.
______________________3.
______________________4.
does not sell equipment)
______________________5.
main line of business is not related to furniture)
______________________6.
______________________7.
______________________8.
______________________9.
______________________10.
A. Cash transactions related to changes
in equity and borrowings of the
business. Examples are the sale of
the company shares, the repurchase
of shares, and dividend payments
B. 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.
C. Cash transactions related to
purchase of non-current assets or
long-term assets, as well as cash
received from their sale
D. The balance of the cash account at
the beginning of the accounting
period.
E. Activities that constitute the
revenue-producing activities of the
company.
C. Financing activities or non-cash transaction:
Cash received from customers
Cash paid to suppliers
Cash paid to employees
Cash paid to purchase equipment (the company
Cash received from the sale of furniture (company’s
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
Activity 3:
Directions: Prepare a Cash Flow Statement given below: Be sure to categorize the
items/transactions appropriately in accordance with the parts of a cash flow
statement. Follow the correct format in the example shown.

1. Juana’s sari-sari store had the following transactions during the year:
a. Purchase of goods. Paid cash. 100,000
b. Sale of goods. Received cash. 150,000
c. Paid utilities 30,000
d. Paid rent 10,000
e. Sold equipment for cash 100,000
f. Owner withdraws investment 10,000

WRAP-UP

Clear and Cloudy! DIRECTIONS: Fill-in the needed answer below.

CLEAR CLOUDY

What are the 3 most important lessons What parts of the lesson you find
you’ve learned and understood unsure or confusing and need
in the lesson? clarification?
1. 1.

2.
2.

3.

3.
 VALUING

There are times that your monthly allowance is not enough for you. What
possible things can you do to spend your money wisely?

_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________

POSTTEST

MULTIPLE CHOICE
Directions: Choose the letter of the correct answer
_____ 1. Begins with the net income or loss reported on the company’s income
statement, and then makes a series of adjustments to this figure to arrive at
the amount of net cash provided by the operating activity
A. Indirect Approach
B. Reverse Approach
C. Deduction Approach
D. Direct Approach
_____ 2. Identify the kind of transaction. The Baby lemon company pays for its
employee.
A. Operating Activities
B. Financing Activities
C. Investing Activities
D. Non- Cash transaction
_____ 3. Which of the following is an example of financing activities?
 A. Blue moon company purchase equipment for the business
B. My t-shirt company pays for their employees
C. Blue moon company pays in cash for a short-term loan
D. My t-shirt company purchases a printer in credit
_____ 4. Statement A: Cash is a precious commodity that will make the
enterprise live on and on.
Statement B: Cash is crucial, therefore, to monitor and budget the
enterprise’s cash position on a daily, monthly, and yearly basis
A. Statement A and B are false
B. Statement A is True and Statement B is False
C. Statement A is False and Statement B is True
D. Statement A and B are true
_____ 5. Statement A: If the ending cash balance turns out to be positive and
stays above the minimum cash required, there is a need to raise funds.
Statement B: Excess cash can then be placed in marketable securities
or other forms of investments.
A. Statement A and B are false
B. Statement A is True and Statement B is False
C. Statement A is False and Statement B is True
D. Statement A and B are true

KEY TO CORRECTION

D 5. C 5.
F 4. D 4.
B 3. C 3.
A 2. A 2.
E 1. A 1.

PRE TEST POST TEST

References
The Commission on Higher Education in collaboration with the Philippine Normal
University., Chairperson: Patricia B. Licuanan, Ph.D., Teaching Guide for Senior
High School FUNDAMENTALS OF ACCOUNTANCY, BUSINESS, AND MANAGEMENT
2., Quezon City., Published by the Commission on Higher Education, 2016
Morato, Eduardo A. Jr. 2015. A Trilogy in Entrepreneurship . Philippines : Eduardo
A. Morato Jr.
Edralin, Divina M. 2016. Entrepreneurship. Quezon City. Philippines Vibal Group,
Inc.