STATEMENT OF
CASH FLOWS
PAS 7
Statement of Cash Flows
a component of financial statements
summarizing the operating, investing and
financing activities of an entity
in other words, it provides information about
the cash receipts and cash payments of an
entity during a period
useful in assessing the ability of the entity to
generate cash and cash equivalent
CASH
Cash on Petty Cash
Hand Fund
Cash in Other Cash
Fund
Bank (for current purposes)
CASH EQUIVALENTS
“short-term, highly liquid investments
that are readily convertible into known
amount of cash which are subject to
an insignificant risk of changes
in value”
-----------------------------
maturity of 3 months or less
from date of acquisition
Identification: Cash Equivalent
ITEMS √ OR X
1. 3-month BSP treasury bill
2. checks, bank drafts and money orders
3. 3-month time deposit
4. 3-year BSP treasury bill purchased 5 months before
date of maturity
5. 3-month money market instrument
6. redeemable PS acquired 3 months before redemption
date
7. 3-year BSP treasury bill purchased 2 months before
date of maturity
Identification: Cash Equivalent
ITEMS √ OR X
1. 3-month BSP treasury bill √
2. checks, bank drafts and money orders X
3. 3-month time deposit √
4. 3-year BSP treasury bill purchased 5 months before X
date of maturity
5. 3-month money market instrument √
6. redeemable PS acquired 3 months before redemption √
date
7. 3-year BSP treasury bill purchased 2 months before √
date of maturity
SEATWORK
Rook Company, Kale Company, Oakwood Company
Ans. C
A
A
Seawall Company, Santana Company
Ans. A
A
Activities in Business Organizations
Financing Activities
• Methods used by the organization to obtain financial resources and
how it manages these resources
• Involves Non-current Liabilities and Equity
• Includes dividend paid
Investing Activities
• Using capital from financing activities to acquire other resources used
in the transformation process
• Involves Non-current Assets
Operating Activities
• Involves the use of resources to design, produce, distribute and
market goods and services
• Includes Trading Securities, Dividend Income, Interest Income and
Interest Expense
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Interest Income O/I Interest Expense O/F
Dividend Income O/I Dividend Paid F/O
Income taxes
PAS 7
cash flows arising from income taxes shall be
separately disclosed as cash flows from
operating activities unless they can be
specifically identified with investing and
financing activities
Noncash transaction
Investing and financial transactions that do
not require use of cash or cash equivalents
shall be excluded from the statement of cash
flows
Statement of cash flows is strictly a cash
concept
seatwork: classify
Cash Flows O-I-F
1. Cash receipts from issuance of OS
2. Cash receipts from customers
3. Cash receipts from dividends on long-
term investments
4. Cash receipts from repayments of loan
made to another company
5. Cash payments for wages and other
operating expenses
6. Cash payment for insurance
7. Cash payment for dividends
8. Cash payments for taxes
seatwork: classify
Cash Flows O-I-F
1. Cash receipts from issuance of OS F
2. Cash receipts from customers O
3. Cash receipts from dividends on long- O
term investments
4. Cash receipts from repayments of loan I
made to another company
5. Cash payments for wages and other O
operating expenses
6. Cash payment for insurance O
7. Cash payment for dividends F
8. Cash payments for taxes O
seatwork: classify
Cash Flows O-I-F
1. Cash receipts from issuance of OS F
2. Cash receipts from customers O
3. Cash receipts from dividends O/I
on long-term investments
4. Cash receipts from repayments of loan I
made to another company
5. Cash payments for wages and other O
operating expenses
6. Cash payment for insurance O
7. Cash payment for dividends F/O
seatwork: compute net cash provided or
used per activity
Cash Flows Amount O-I-F
1. Cash receipts from issuance of OS 400,000 F
2. Cash receipts from customers 200,000 O
3. Cash receipts from dividends on long- 30,000 O
term investments
4. Cash receipts from repayments of loan 220,000 I
made to another company
5. Cash payments for wages and other 120,000 O
operating expenses
6. Cash payment for insurance 10,000 O
7. Cash payment for dividends 20,000 F
8. Cash payments for taxes 40,000 O
seatwork: compute net cash provided or
used per activity
Cash flows from operating activities
Cash receipts for customers 200,000
Cash receipts from dividends on
long-term investments 30,000
Cash payments for wages and other
operating expenses (120,000)
Cash payments for insurance ( 10,000)
Cash payments for taxes ( 40,000)
Net cash provided by
operating activities 60,000
DIRECT METHOD
seatwork: compute net cash provided or
used per activity
Cash flows from investing activities
Cash receipts from repayments of
loan made to another company 220,000
Cash payments to purchase land ( 80,000)
Net cash provided by
investing activities 140,000
DIRECT METHOD
seatwork: compute net cash provided or
used per activity
Cash flows from financing activities
Cash receipts from issuance of OS 400,000
Cash payments for dividends ( 20,000)
Net cash provided by
financing activities 380,000
DIRECT METHOD
Indirect method
Entity shall report cash flows from operating
activities using either direct method or
indirect method
Begins with accrual basis net income and
applies a series of adjustments to convert the
income to a cash basis
From accrual basis NET INCOME
ITEMS ADD DEDUCT
1
all decreases all increases
trade noncash
current assets
2
all increases all decreases
trade noncash
current liabilities
3
√
noncash expenses
depreciation
amortization
4
gain or loss on disposal of any loss any gain
Cash Flows O-I-F
1. Net income
2. Payment for purchase of building
3. Increase in accounts receivable
4. Proceeds from issuance of OS
5. Increase in accounts payable
6. Proceeds from sale of land
7. Depreciation expense
8. Payment of dividends
9. Gain on sale of land
10.Decrease in inventory
11.Payment for purchase of long-term inv
12.Amortization of disc. on BP
13.Proceeds from issuance of note
14.Increase in deferred taxes payable
Cash Flows O-I-F
1. Net income O
2. Payment for purchase of building I
3. Increase in accounts receivable O
4. Proceeds from issuance of OS F
5. Increase in accounts payable O
6. Proceeds from sale of land I
7. Depreciation expense O
8. Payment of dividends F
9. Gain on sale of land O
10.Decrease in inventory O
11.Payment for purchase of long-term inv I
12.Amortization of disc. on BP O
13.Proceeds from issuance of note F
14.Increase in deferred taxes payable O
Cash Flows Amount O-I-F
1. Net income 59,200 O
2. Payment for purchase of building 98,000 I
3. Increase in accounts receivable 7,400 O
4. Proceeds from issuance of OS 37,100 F
5. Increase in accounts payable 4,500 O
6. Proceeds from sale of land 7,000 I
7. Depreciation expense 12,600 O
8. Payment of dividends 36,000 F
9. Gain on sale of land 5,300 O
10.Decrease in inventory 3,700 O
11.Payment for purchase of long-term inv 9,600 I
12.Amortization of disc. on BP 1,900 O
13.Proceeds from issuance of note 18,000 F
14.Increase in deferred taxes payable 5,000 O
OPERATING INVESTING FINANCING
1 59,200
2 (98,000)
3 (7,400)
4 37,100
5 4,500
6 7,000
7 12,600
8 (36,000)
9 (5,300)
10 3,700
11 (9,600)
12 1,900
13 18,000
14 5,000
Net effect on cash?
Net cash provided by
operating activities 71,900
Net cash used in
investing activities (100,600)
Net cash provided by
financing activities 19,100
Net decrease in cash ( 9,600)
Cash balance ending?
Cash, beginning 20,300
Net cash provided by
operating activities 71,900
Net cash used in
investing activities (100,600)
Net cash provided by
financing activities 19,100
Cash, ending 10,700
SEATWORK
Karr Company, Capiz Company
Ans. A, D, B
A, B, C, D
