FUNDAMENTALS OF

ACCOUNTANCY,BUSINESS,AND
MANAGEMENT 2
Cash flow Statement (CFS)

 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 compared to the SCI
which follows the accrual principle.
 Direct-the operating cash flow section of the CFS under the
direct method would show each major class of gross cash
receipts and gross cash payments (Deloitte Global Services
Limited, 2015).
 Indirect- 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 effects of non-
cash transactions (Deloitte Global Services Limited, 2015).
Different parts of the Cash Flow Statement

 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).
 Investing Activities- Cash transactions related to purchase or
sale of non-current assets (Deloitte Global Services Limited,
2015).
 Financing Activities- Cash transactions related to changes in
equity and borrowings
 Net change in cash or net cash flow (increase/decrease)-
The net amount of change in cash whether it is an increase or
decrease for the current period. The total change brought by
operating, investing and financing activities.
 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.
 Heading
i. Name of the Company
ii. Name of the Statement
iii. Date of preparation (emphasis on the wording – “for the”)
 Sample of the Direct Method
i. First part is operating activities
ii. Second part is investing activities
iii. Third part is financing activities
LEARNING IS FUN COMPANYCASH FLOW STATEMENT FOR
THE YEAR ENDED DECEMBER 31, 2016

 Receipts from Customers P 1,000,000

 Payments to Suppliers and Employees (700,000)
 Net Cash generated by Operating Activities P 300,000
 Purchases of Property and Equipment (P 150,000)
 Net Cash used in Investing Activities (P 150,000)
 Long term loan from a bank P 300,000
 Additional investment from owner 100,000
 Withdrawals by owner (80,000)
 Net cash generated by Financing Activities P 320,000
 Net increase in cash and cash equivalents P 470,000
 Cash, January 1, 2016 110,000
 Cash, December 31, 2016 P 580,000
SOLUTION: Direct Method

LEARNING IS FUN COMPANY

CASH FLOW STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 2016

1.Cash flows from Operating Activities

Receipts from Customers P 1,000,000
Payments to Suppliers and Employees (700,000)
Net Cash generated by Operating Activities P 300,000
2.Cash flows from Investing Activities
Purchases of Property and Equipment (P 150,000)
Net Cash used in Investing Activities (P 150,000)
3.Cash flows from Financing Activities
Long term loan from a bank P 300,000
Additional investment from owner 100,000
Withdrawals by owner (80,000)
Net cash generated by Financing Activities P 320,000
Net increase in cash and cash equivalents P 470,000
Cash, January 1, 2016 110,000
Cash, December 31, 2016 P 580,000
SOLUTION FOR NET INCREASE IN CASH AND CASH
EQUIVALENT

1.Cash flows from Operating Activities

Net Cash generated by Operating Activities P 300,000
minu
2.Cash flows from Investing Activities s
Net Cash used in Investing Activities (P 150,000)
p
l
3.Cash flows from Financing Activities u
s
Net cash generated by Financing Activities P 320,000
Net increase in cash and cash equivalents P470,000