Statement of Cash Flows

STATEMENT OF CASH FLOWS
What are the components of your financial

statements?
statements?
(a) Statement of Financial Position (SFP)
(b) Statement of Comprehensive Income (SCI)
(c) Statement of Changes in Equity
(d) Statement of Cash Flows
(e) Notes to Financial Statements

statements?
Assets = Liabilities + Equity

statements?
Net Sales – COGS – OPEX = Net Income

statements?
Net Sales – COGS – OPEX = Net Income
Beg. Capital + Income – Withdrawals = End. Capital

STATEMENT OF CASH FLOWS
• The statement of cash flows provides
information about the cash receipts and cash
payments of an entity during a period.
• It is a formal; statement that classifies cash
receipts (inflows) and cash payments (outflows)
into operating, investing and financing activities.
• This statement shows the net increase or
decrease in cash during the period and the cash
balance at the end of the period;
Activities related to cash flow
OPERATING INVESTING FINANCING
Activities of an entity
Related to their main
Revenue generating
Activities of providing
Goods and services
Activities of an entity
Related to their main
Revenue generating
Activities of providing
Goods and services
GENERALLY, WHERE TO
SEE IN FS?
Income Statement,
BS Current Assets
BS Current Liabilities
Activities of an entity Activities of an entity
Related to their main related to sale and
Revenue generating purchase of long – term
Activities of providing assets and other
Goods and services investment
GENERALLY, WHERE TO
SEE IN FS?
Income Statement,
BS Current Assets
Activities of an entity Activities of an entity
Related to their main related to sale and
Revenue generating purchase of long – term
Activities of providing assets and other
GENERALLY, WHERE TO GENERALLY, WHERE TO

SEE IN FS? SEE IN FS?
Income Statement, BS Noncurrent Assets
BS Current Assets
Activities of an entity Activities of an entity Activities of an entity
Related to their main related to sale and related to acquisition
Revenue generating purchase of long – term of funding for the use
Activities of providing assets and other of the entity.
GENERALLY, WHERE TO GENERALLY, WHERE TO

SEE IN FS? SEE IN FS?
Income Statement, BS Noncurrent Assets
BS Current Assets
Activities of an entity Activities of an entity Activities of an entity
Related to their main related to sale and related to acquisition
Revenue generating purchase of long – term of funding for the use
Activities of providing assets and other of the entity.
GENERALLY, WHERE TO GENERALLY, WHERE TO GENERALLY, WHERE TO

SEE IN FS? SEE IN FS? SEE IN FS?
Income Statement, BS Noncurrent Assets BS Noncurrent Liabilities
BS Current Assets & Equity
CASH INFLOW – OPERATING
(Income Statement, Current Assets, Current Liabilities)
• Cash received from sales and service revenue

• Refund from supplier
• Collection of A/R
___A/R___
100,000 75,000
A/R Cash
Sales A/R
25,000
CASH OUTFLOW – OPERATING
(Income Statement, Current Assets, Current Liabilities)
• Payment to supplier
• Payment of operating expenses like salaries,
rent, utilities, and taxes
• Payment for interest expense
• Charity contributions
• Cash refund to customer
CASH INFLOW – INVESTING
(Noncurrent assets)
• Cash proceeds from selling productive assets
like PPE
• Cash proceeds from selling investment in
equity securities of other companies
CASH OUTFLOW – INVESTING
(Noncurrent assets)
• Payments for the purchase of productive
assets like PPE
• Payments to acquire investment in equity
securities
CASH INFLOW – FINANCING
(Noncurrent liabilities and equity)
• Cash investments by the owner
• Cash proceeds from issuance of share capital
• Cash proceeds from long – term borrowing
CASH OUTFLOW – FINANCING
(Noncurrent liabilities and equity)
• Cash withdrawal by the owner
• Payments of cash dividends to shareholders
• Payments of long – term borrowing
2 Methods of Cash Flow
(a) Direct Method – reports gross cash inflows
and gross outflows from operating activities
(b) Indirect Method – reconciles net income with

net cash flow from operating activities by
adjusting net income
PROBLEM
ABC established her own service company. She
invested 2,000,000 and purchased equipment costing
120,000 and office furniture worth 80,000. During the
year, 500,000 were earned, 200,000 were on account.
Salaries were paid amounting to 150,000, office rent
to 40,000 and utilities amounted to 30,000.
Receivables collected amounted to 70,000. The owner
withdrew 100,000 for personal emergency. At the time
when the carrying value of the furniture was 70,000.
ABC sold it for 75,000 cash.
PROBLEM
ABC established her own service company. She invested 2,000,000 and
purchased equipment costing 120,000 and office furniture worth
80,000. During the year, 500,000 were earned, 200,000 were on
account. Salaries were paid amounting to 150,000, office rent to
40,000 and utilities amounted to 30,000. Receivables collected
amounted to 70,000. The owner withdrew 100,000 for personal
emergency. At the time when the carrying value of the furniture was
70,000. ABC sold it for 75,000 cash.
CASH FLOW USING DIRECT METHOD
CASH FLOW USING INDIRECT METHOD
NET INCOME
+ Non-cash expenses (DEPRECIATION, LOSS ON
SALE OF EQUIPMENT)
+ Decrease in Current Asset (other than cash)
- Increase in Current Asset (other than cash)
+ Increase in Liabilities
- Decrease in current liabilities
Reference:
https://www.youtube.com/watch?v=-
0FeENIS1oo&t=1682s

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STATEMENT OF CASH FLOWS

What are the components of your financial

(b) Statement of Comprehensive Income (SCI)

(c) Statement of Changes in Equity

(d) Statement of Cash Flows

(e) Notes to Financial Statements

(c) Statement of Changes in Equity

(d) Statement of Cash Flows

(e) Notes to Financial Statements

(d) Statement of Cash Flows

(e) Notes to Financial Statements

(e) Notes to Financial Statements

GENERALLY, WHERE TO GENERALLY, WHERE TO

GENERALLY, WHERE TO GENERALLY, WHERE TO

GENERALLY, WHERE TO GENERALLY, WHERE TO GENERALLY, WHERE TO

• Cash received from sales and service revenue

(b) Indirect Method – reconciles net income with

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