Cash Flow Statement (CFS).pptx

acctg

1. Cash Flow Statement (CFS)

2. REVIEW (20 MINS) Give specific account titles for each of the terms above and give examples of service businesses and merchandising businesses a. Accrual – accrued income, accrued expense b. Depreciation – equipment, furniture, building

3. MOTIVATION (15 MINS) Prepare a Personal CFS: a. Get a ¼ piece of paper. b. Write their monthly allowance (computed by daily allowance x number of days in a month) and any liabilities that they got from classmates, friends, family members c. Write the amount they spend on food, transportation, etc. (make it monthly to match their allowance) d. Deduct the amount they spend from the amount their allowance e. Associate allowance with inflows and spending with outflows .

4. CASH FLOW STATEMENT Provides an analysis of inflows and/or outflows of cash from/to operating, investing and financing activities. This statement shows cash transactions only compared to the SCI which follows the accrual principle. I mportance : I t 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.

5. PARTS OF A CASH FLOW STATEMENT a. Heading i . Name of the Company ii. Name of the Statement iii. Date of preparation (emphasis on the wording – “for the”) b. Sample of the Direct Method i.First part is operating activities ii. Second part is investing activities iii. Third part is financing activities

6. 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. Investing Activities – Cash transactions related to purchase or sale of non-current assets 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.

7. Sample CFS

8. 2 forms of CFS: Direct and Indirect Approach 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 . provides information regarding the actual cash transactions generated/used in operations 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).

9. Sample Indirect Approach

10. PRACTICE 1. Gain on sale of property and equipment is part of what activity in the CFS? 2. Changes in long term liabilities is part of what activity in the CFS? 3. The company presented the following in order to aid the accountant in preparing the CFS: a. Net income: P200,000 b. Depreciation expense : P 25,000 c. Gain on sale of property and equipment: P100,000 d. Decrease in trade and other receivables: P 70,000 e. Purchase of property and equipment: P200,000 f. Payment of loan from bank: P150,000

11. 1. Juana’s sari-sari store had the following transactions during the year: a. Purchase of goods. Paid cash. 100,000 b. Sale of goods. Received cash. 150,000 c. Paid utilities 30,000 d. Paid rent 10,000 e. Sold equipment for cash 100,000 f. Owner withdraws investment 10,000

12. 2. Compute for the net cash flow generated by/used in operating activities Suggested Answer:P10,000 generated by operating activities (Topic: Operating Activities) 3. Using the given above, compute for the net cash flow generated by/used in investing activities. Suggested Answer: P100,000 generated by investing activities (Topic: Investing Activities) 4. Using the given above, compute for the net cash flow generated by/used in financing activities. Suggested Answer: P10,000 used in financing activities (Topic: Investing Activities) 5. Using the given above, prepare a Cash Flow Statement. Suggested Answer: (Topic: Statement Preparation - Direct)

13. Prepare the Cash Flow Statement of Teresa’s Delivery Services using the following: Date: December 31, 2018 Cash received from services rendered P160,000 Cash received from sale of Old Truck 100,000 paid employees salary 50,000 paid water and electric bills 10,500 cash received from accounts receivables 25,000 purchased second hand delivery truck 250,000 cash paid for supplies 15,000 Mrs. Teresa Initial Capital 200,000 purchased equipment 25,300 Mrs. Teresa Drawings 30,000 cash paid for repair and maintenance 5,000

14. Prepare the Cash Flow Statement of Teresa Cruz Trading using the following: Date: December 31, 2018 Cash received from sale of Goods P210,000 Cash received from sale of Old Van 120,000 paid employees salary 55,000 paid utility bills 9,500 cash received from accounts receivables 25,000 purchased second hand delivery truck 250,000 cash paid for supplies 15,000 Mrs. Cruz Initial Capital 200,000 paid long term loan to BPI 110,000 purchased equipment 25,300 Mrs. Teresa Drawings 30,000 transportation 3,000