Cash Flow Statement

O B J E C T I V E S:

• Discuss the components and

structures of a Cash Flow
Statement.
• Prepare a Cash Flow
Statement.
Cash Flow Statement / Statement of Cash Flow
It is a formal statement that report about entity’s
“Cash” transactions which classify as cash receipts
(inflows) and cash payments (outflow) into operating,
investing and financing activities.

The Statement presented:

a) the net increase or decrease in cash during the period
and the cash balance at the end of the period.
b) Only “cash” transactions are recorded on Statement
of Cash Flow.
c) Project the future net cash flow of the entity.
 Direct Method
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).

CFO = Cash Inflows - Cash Out flows

Indirect Method
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).

CFO = Net Income + - Adjustments

Cash Flow Activities
Operating Activities Investing Activities Financing Activities
Activities that are directly Activities of an entity’s that Activities of the business
related to the main is related to sale and related to the acquisition
revenue-producing purchase of long-term of funding for the use of
activities of the company assets. the entity.
such as cash from
customers and cash paid to
supplier/employees.

Reported in Reported in Reported in

a. Statement of SFP - Non-current Assets SFP - Non-current
Comprehensive Income, Liabilities & Equity
b. SFP-Current Assets
c. SFP-Current liabilities
Operating Activities : Net income / Revenue Activities
Cash Inflows
• Receipts from sales of goods and
rendering services. (+)
• Collection of Accounts Receivable.
(+)
• Receipts from royalties, fees,
commission and other revenues.
(+)
• Refund to Suppliers. (+)
Cash Outflows
• Payment to suppliers goods and
services. (-)
• Payment for operating expenses.
(-)
• Payment for interest expense. (-)
• Charity Donation. (-)
• Cash Refund to customer. (-)
 Investing Activities : Non-current Asset Activities

Cash Inflows Cash Outflows

• Cash proceeds from selling • Payment for purchasing property
property, plant and equipment. plant and equipment. (-)
(+) • Payment for purchasing debt and
• Cash proceeds from selling
equity securities. (-)
Investment in debts or equity
securities. (+)
 Financing Activities : Non-current Liabilities & Equity

Cash Inflows Cash Outflows

• Cash investment by owners. (+)
• Cash proceeds from the issuance
of share capital. (+)
• Cash proceeds from long term
borrowing (Bank Loan). (+)
• Cash withdrawalby owners. (-)
• Payment for cash dividednd to
shareholder. (-)
• Payment for long term borrowing
(Principal Amount). (-)
 Preparation of Cash Flow Statement
• Heading consist of company name, title of the
statement and the period covered by the
statement.
• Analyze transaction, classify whether the nature
transactions are operating activities, Investing
activities and financing activities.

• Prepare and calculate the

Operating Activities Section

• Prepare and calculate the

Investing Activities Section

• Prepare and calculate the

Financing Activities Section
 Preparation of Cash Flow Statement
• To compute for the Net Income or
decreases in cash. Add the total Net cash
flow from operating activities, Net cash
flow from investing activities and net
cash from financing activities

• Add the net increase in cash and cash at

the beginning of the period to determine
the Cash at the end of the period.

Note: The cash ending calculated at the end

of the period is the amount presented in
the cash account on Statement of Financial
Position.
 1
Preparation of Statment of
Cash Flow for Direct
Method
 Preparing Cash Flow Statement
Below are all the cash transactions of Al Queen Tattoo for December 31, 2020. Classify each
cash transactions whether it is an Operation Activities (OA), Investing Activities (IA) or
Financing Activities (FA). Prepare the CFS of the business and answer the following
questions.
Cash payment for Supplier (25,000) 1. How much is the cash flow from operating
Cash receipts for services 50,000 activity ?
2. How much is the cash flow from investing
Withdrawals by owner’s (5,000)
activity ?
Proceeds from bank loans 25,000 3. How much is the cash flow from financing
activity ?
Cash investment of owners 115,000
4. How much is the net increase or decrease
Payment for purchased of 100,000 in cash for the year ?
equipment 5. How much is the cash as of December 31,
Cash Balance at the beginning 1,000,000 2020 ?
 Cash payment for Supplier (25,000) Operating Outflow
Cash receipts for services 50,000
Operating Inflow
Withdrawals by owner’s (5,000)
Financing Outflow
Proceeds from bank loans 25,000
Financing Inflow
Cash investment of owners 115,000
Financing Inflow
Payment for purchased of 100,000
equipment Investing Outflow
Cash Balance at the beginning 1,000,000
Below are all the cash transactions of Al Queen Tattoo for December 31, 2020. Classify each cash transactions
whether it is an Operation Activities (OA), Investing Activities (IA) or Financing Activities (FA). Prepare the CFS
of the business and answer the following questions.
AL QUEEN TATTOO
CASH FLOW STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 2020
Cash flows from Operating Activities
Cash Receipts for services 50,000
Cash Payment for supplier (25,000)
Net Cashflow from Operating Activities P 25,000
Cash flows from Investing Activities
Payment for purchased of equipment (100,000)
Net Cash flow from Investing Activities (100,000)
Cash flows from Financing Activities
Cash investment of owners 115,000
Proceeds from bank loans 25,000
Withawal by owner's (5,000)
Net cash flow from Financing Activities 135,000
Net increase in cash 60,000
Cash Balance at the beginning 1,000,000
Cash, December 31, 2020 1,060,000
The following are the various cash flows and other information of the
TEEN WOLF Company for 2020
Additional information: The company’s statement of financial position
reported the cash balance of P500,000 as of January 1, 2020 and P719,000 as
of December 31, 2020

a. Payment of interest P82,000 OUTFLOWS OPERATING

b. Proceeds from the sale of land P79,000 INFLOWS INVESTING

c. Cash withdrawal P121,000 OUTFLOWS FINANCING

e. Collections from customer P983,000 INFLOWS OPERATING

f. Payments of income taxes P154,000 OUTFLOWS OPERATING

g. Additional cash investments P189,000 INFLOWS FINANCING

h. Payments to supplier and employees OPERATING
OUTFLOWS
P675,000
 TEEN WOLF COMPANY
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2020
Cash flows from Operating Activities
e. Collections from customer P983,000
h. Payments to suppliers and employees (675,000)
f. Payments of income taxes (154,000)
a. Payment of interest (82,000)
Net Cashflow from Operating Activities P 72,000
Cash flows from Investing Activities
b. Proceeds from the sale of land P 79,000
Net Cash flow from Investing Activities P 79,000
Cash flows from Financing Activities
g. Additional cash investments P 189,000
c. Cash withdrawal (121,000)
Net cash flow from Financing Activities P 68,000
Net increase in cash P 219,000
Cash, January 1, 2020 P 500,000
Cash, December 31, 2020 P 719,000
 1
Preparation of Statment of
Cash Flow for Indirect
Method
SCF Indirect method
The indirect method of Statement of cash flows is prepared in the
following manner;
• The presentation of cash flows from operating activities starts
with net income, adjusted with non-cash expenses and changes
in working capital.
• The presentation of cash flows from investing and financing
activities works the same way as that of the direct method.

DIRECT METHOD SCF > USER-FRIENDLY*

INDIRECT METHOD SCF > ACCOUNTANT-FRIENDLY*

SCF Indirect Method: Operating Activities

Net income
Non-cash expenses
Operating income before working capital changes

Decrease in current assets

Increase in current assets
Increase in current liabilities
Decrease in current liabilities
Net cash flow operating activites
Indirect Method

 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
 SampleIndirect Method
LEARNING IS FUN COMPANY
CASH FLOW STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 2016

Cash flows from Operating Activities

Net Income P 250,000
Add back: Depreciation 20,000
Loss on sale of property and equipment 10,000
P 280,000
Increase in Trade and Other Receivables (40,000)
Increase in Trade and Other Payables 60,000
Net cash flow from operating activities P 300,000
 LEARNING IS FUN COMPANY
CASH FLOW STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 2016
Cash flows from Operating Activities
Net Income P 250,000
Add back: Depreciation 20,000
Loss on sale of property and equipment 10,000
P 280,000
Increase in Trade and Other Receivables (40,000)
Increase in Trade and Other Payables 60,000
Net cash flow from operating activities P 300,000
Cash flows from Investing Activities
Purchases of Property and Equipment (P 150,000)
Net Cash flow from Investing Activities (P 150,000)
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 flow from Financing Activites P 320,000
Net increase in cash P 500,000
Cash January 1, 2016 100,000
Cash, Decemeber 31, 2016 P 600,000
THANK YOU!