GRADE

12

ACCOUNTING 2
Work Sheet (Q1, Wk4)

Cash Flow Statement (CFS)

Most Essential Learning Competency:

1. Discuss the components and structures of a CFS

2. Prepare a CFS
 Activities

Activity 1.1
Title of Activity:
Objective:
1. Compute accurately the net cash flow/used in operating
activities for Cash Flow Statement (CFS).

2. Compute accurately the for net cash flow generated by/used

in financing activities for Cash Flow Statement (CFS).

3. Develop a keen analysis in preparing the correct format of

CFS.

4. Reflect the importance of CFS in a business.

Procedure:
A. Juana’s sari-sari store had the following transactions in 2019:
Purchase of Goods - P100,000
Sales of Goods. Received cash. - 150,000
Paid utilities - 30,000
Paid rent - 10,000
Sold equipment for cash - 100,000
Owner withdraws cash - 10,000

Compute for the net cash flow generated/used in operating

activities.

B. Compute for the net cash flow generated by/used in

financing activities.

C. Prepare the CFS for the year ended 2019 with beginning cash
balance of P50,000 in correct format. Write all your answers
in a separate yellow pad paper.

2
Critical Thinking Questions
1. How do you distinguish the accounts under Operating Activities?

________________________________________________________

2. How do you distinguish the accounts under Financing Activities?

3
 Remember
• A Cash Flow Statement, also known as Statement of Cash
Flows, is a financial statement that shows how changes in
balance sheet accounts and income affect
cash and cash equivalents, and breaks the analysis down to
operating, investing and financing activities.
o provides an analysis of inflows/outflows of cash from to
operating, investing and financing activities.
o provides an analysis of inflows/outflows of cash from to
operating, investing and financing activities.
▪ This statement shows cash transactions only compared
to the SCI w/c follows the accrual principle

• Importance of CFS:
It provides the net change in the cash balance of a company
for a period. This helps owners see if their revenues are actually
translated to cash collections or if they have enough cash
inflows in order to pay any maturing liabilities.
• Different Parts of the Cash Flow Statement:
o Operating Activities – activities that are directly related to
the main revenue-producing activities of the company –
cash from customers and cash paid to suppliers/employees
o Investing Activities – cash transactions related to purchase
or sale of non-current assets
o Financing Activities – cash transactions related to changes
in equity and borrowing
o 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
o Beginning Cash Balance – the balance of the cash
account at the beginning of the accounting period

4
 o 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

• Guides in Preparation of SCF:

o Cash transactions w/c will result in the generation of income
& the incurring of expenses will be shown under the caption
Operating Activities
o Cash transactions affecting the non-operating current
assets as well as the acquisition or sale of non-current assets
will be shown under the caption Investing Activities
o Cash transactions w/c will affect non-current liabilities and
owner’s equity (additional. investment or withdrawal) will
be shown under the caption Financing Activities

• 2 Ways of SCF Presentation:

o 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 payments.

Source: Internet

5
 o Indirect Method – the operating cash flow section of the
CFS under the indirect method will reconcile the net
income of the company with the total cash flows
generated/used in operating activities by adjusting the net
income for effects of non-cash transactions.

Source: Internet

• Receipts from customers – derived from the ff. formula:

Ending Accts. Receivable =
Beg. Accts. Receivable + Net Sales – Collections
Therefore:
Collections (receipts from customers) = Beg. A/R +
Net Sales or Net Revenue – Ending A/R

o Accounts Receivable T-Account:

Dr Cr
Beg. Bal. + Net Sales Collections
Ending Balance

6
• Payments to Suppliers and Employees – derived from the
following formula:
Ending A/P & Ending Accrued Sal. Exp. =
Beg. A/P + Beg. Accrued Sal. Exp. + Net Purch. +
Salaries Exp. – Payments

Therefore:
Payments = Beg. Accounts Payable + Beg. Accrued Sal.
Exp. + Net Purch. + Sal. Expense - Payments

o Accounts Payable T-Account

Dr Cr
Payments Beg. Bal. + Net Purchases +
Salaries Expense
Ending Balance

7
 Checking your Understanding
Critical Thinking Questions: Write all your answers in a
separate yellow pad paper.
1. How CSF differs from SCI?
___________________________________________________________
___________________________________________________________

2. How do you associate your personal allowance with inflows

and your spending with outflows?
___________________________________________________________
___________________________________________________________

3. What is the difference between the Direct and Indirect

Method of CSF?
___________________________________________________________
___________________________________________________________

4. How could you explain that a company can earn a lot and
have numerous assets and yet have very small equities?
___________________________________________________________
___________________________________________________________

5. How do you relate the importance of CSF to your personal

cash inflow and outflow that at the end of the year you can
have a net increase in cash?
___________________________________________________________
___________________________________________________________

8
 Evaluation
Directions: Write the letter of the correct answer.
1. Cash received from customers
A. Operating activity C. Investing activity
B. Ending Cash Balance D. Financing activity

2. Cash paid to purchase equipment

A. Operating activity C. Investing activity
B. Ending Cash Balance D. Financing activity

3. 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.
A. Direct Method C. Indirect method
B. Ending Cash Balance D. Financing activity

4. Cash received from getting a loan from a bank

A. Direct Method C. Indirect method
B. Beginning Cash Balance D. Financing activity

5. Depreciation expense
A. Cash C. Non-cash
B. Accruals D. Deferred

6. Cash paid to suppliers

A. Operating activity C. Financing activity
B. Investing activity D. Cash Outflow

7. Purchase goods on credit

A. Cash C. Non-cash
B. Accruals D. Deferred

8. Cash paid to employees

A. Operating activity C. Investing activity
B. Ending Cash Balance D. Financing activity

9
9. Cash paid to owners
A. Operating activity C. Investing activity
B. Ending Cash Balance D. Financing activity

10. The balance of the cash account at the beginning of the

accounting period
A. Direct Method C. Indirect method
B. Beginning Cash Balance D. Financing activity

10
 Answer Card
10. B
9. D
8. A
7. C
6. A
5. C
4. D
3. B
2. C
1. A

Evaluation

References
Books:
Fundamentals of Accountancy, Business & Management 2 (Teachers Guide)
Zenaida Vera Cruz-Manuel, 21st Century Accounting Process (22nd Ed.),
Raintree Trading & Publishing, Inc.
Nelson S. Abeleda, Simplified Accounting for Single Proprietorship (2009),
Nelson Publications
Internet:
Paul’s Guitar Shop (Image) – Direct Method
https://www.google.com/search?q=direct+method+cash+flow+statement&sxsrf=ALeKk005zLTPWdH
Uu5bX18nANQWAOAyS1Q:1594651647595&source=lnms&tbm=isch&sa=X&ved=2ahUKEwiC7vqnv
MrqAhUQfnAKHeqOBfcQ_AUoAXoECA8QAw&biw=1350&bih=640#imgrc=06QxVrZ1ZsozTM
Cash Flow Statement – Indirect Method (Image)
https://www.google.com/search?q=indirect+method+cash+flow+statement+example&tbm=isch&ve
d=2ahUKEwjp6syEvcrqAhXpxIsBHaKOAU4Q2-
cCegQIABAA&oq=indirect+method+cash+flow+statement&gs_lcp=CgNpbWcQARgEMgQIIxAnMgQIIx
AnMgIIADICCAAyAggAMgIIADICCAAyBggAEAUQHjIGCAAQBRAeMgYIABAIEB46BAgAEBg6BAgAEB5Q0
NAHWLTpB2C3ighoAHAAeAGAAacIiAG_GpIBDTAuMy4wLjEuNi0yLjGYAQCgAQGqAQtnd3Mtd2l6LWlt
Zw&sclient=img&ei=wXQMX6mGNemJr7wPop2G8AQ&bih=640&biw=1333&hl=en#imgrc=f6VI46G_4
gl18M

11
 Written by:
EVELYN S. PLAZA, San Juan City Academic Senior High School

For questions or comments, write or call:

Department of Education
Schools Division Office – San Juan City
Pinaglabanan St., San Juan City, Philippines 1500
Telefax: (632) 8451-2699; (632) 8251-2383
Email Address: depedsanjuanrecords@gmail.com

12