CASH FLOW STATEMENT (CFS)
FABM II
Module 4
OBJECTIVES
The learners should be able to:
1. discuss the components and structures of a CFS
2. prepare a CFS
DEFINITION OF TERMS
CASH FLOW STATEMENT – Provides an analysis of
inflows and/or outflows of cash from/to
operating, investing and financing activities (Deloitte
Global Services Limited, 2015). This
statement shows cash transactions only compared to the
SCI which follows the accrual principle.
DEFINITION OF TERMS
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 (Deloitte Global
Services Limited, 2015).
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).
DEFINITION OF TERMS
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 (Deloitte
Global Services Limited, 2015).
Investing Activities – Cash transactions related to
purchase or sale of non-current assets (Deloitte Global
Services Limited, 2015).
Financing Activities – Cash transactions related to
changes in equity and borrowings.
DEFINITION OF TERMS
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.
Beginning Cash Balance – The balance of the cash
account at the beginning of the accounting period.
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.
LEARNING IS FUN COMPANY
CASH FLOW STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 2016
Cash flows from Operating Activities
Receipts from Customers P 1,000,000
Payments to Suppliers and Employees (700,000)
Net Cash generated by Operating Activities P 300,000
Cash flows from Investing Activities
Purchases of Property and Equipment (P 150,000)
Net Cash used in 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 generated by Financing Activities P 320,000
Net increase in cash and cash equivalents P 470,000
Cash, January 1, 2016 100,000
Cash, December 31, 2016 P 580,000
LEARNING IS FUN COMPANY
CASH FLOW STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 2016
Cash flows from Operating Activities
Receipts from Customers P 1,000,000
Payments to Suppliers and Employees (700,000)
Net Cash generated by Operating Activities P 300,000
Cash flows from Investing Activities
Purchases of Property and Equipment (P 150,000)
Net Cash used in 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 generated by Financing Activities P 320,000
Net increase in cash and cash equivalents P 470,000
Cash, January 1, 2016 100,000
Cash, December 31, 2016 P 580,000
PARTS OF CASH FLOW
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
