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know the different components thot comprise the stotement.of cosh flows
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The Statement of Cash Flows summarizes the cash receipts and cash disbursements for the
accounting period. It summarizes the cash activities of the business by classiffing cash inflows
(receipts) and cash outflows [payments) into operating, investing, and financing activities. It
'shows the net increase or decrease of cash in a given period and the cash balance at the end of the
period. This allows management to assess the ability of the business to generate cash and project
future cash flows.

I
THE STATEMENT OF CASH FLOWS
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 COMPONENTS OF THE STATEMENT OF CASH FTOWS CTASSIFIED
ACCORDING TO ACTIVITIES
Operating activities - the cast-r. inflows (receipts) and the cash outflows [payments) arising
from the normal operations of the business

Receipts of Cash

. collections from customers for the performance of services or sale of goods

. royalties, fees, commissions received :

.interest,dividends,andotherincomereceived

Payments of Cash

r to suppliers for services and goods acquired

. employees'salaries
o gov€rhrnent licenses and taxes

interest expense

other operating expenses

Investing Activities [receipts) and the cash outflows (payments) from the
- the cash inflows
purchase and sale of property and equipment, investment in debt or trading securities, lending
money and collection of the principal amount of the money loaned.

Financing Activities - the cash inflows (receipts) and the cash outflows (payments) from the
owners and creditors of the business

It Receipts of Cash
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. original and additional investments by owner
. proceeds ofloan

Payments of Cash

. cash withdrawal of owner

r pdlrment for the principal balance of loan

Clossificotion of Cosh Flows According to Activities F@

 are its transactions'
Ren Ren Merchandising started business last october. The following
classify.each transaction as an operating, investing or financing
activity'

Transaction Activity

Financing
a. Additional investment in the business, ?22,200
Proceeds of sale of equipment, P15,000
Investing
b.
Operating
C. Collection of interest, P9,000
Collection from customers, F3 15,800
Operating
d.
Proceeds of bank loan, F200,000
Financing
e.
Proceeds from sale of furniture, P8,000
Investing
f.
Operating
o
b' Payment of operating expenses, F 145,000
Operating
h. Collection of dividends, P12,000
Cash withdrawal of ownel F30,000
Financing
i.
Operating
i. Payment of interest, P6,000
Collection of rent, F30,000
Operating
k.
Purchase of furniture, P31,000
Investing
l.
Financing
m. Payment of bank loan, F150,000

Based on the classification of activities above, the following

is the statement of cash flow for
Ren Ren Merchandising for the year ended December 3L'2016'

THE STATEMENT OF CASH FLCWS

@I
 Ren Ren Merchandising

ForYear Ended December 31.,2016

Cash Flows from Operating Activities

Receipts
Collections from customers P315,800
Rent income 30,000
Dividends income L2,000
Interest income 9,000
Payments
Operating expenses [145,o00)
Interest expense [6,000)
Net Cash from Operating Activities F215,800
Cash Flows from Investing Activities
Receipts
Proceeds from sale of equipment F 15,000
Proceeds from sale furniture 8,000
Payments
For purchase of furniture [31,000J [8,000)
Net Cash from Investing Activities
Cash Flows from Financing Activities
' Receipts
Additional investment of owner ? 22,200
Proceeds ofbank loan 200,000
Payments
Cash withdrawal of owner [30,000J
Payment of bankloan r150,0001
Net Cash from FinancingActivities 42,200
Net Increase/Decrease in Cash F250,000
Cash balance - fanuary 1 200,000
Cash balance - December 31 P450,000

-:e beginning balance of cash is added to the net increase or decrease in cash resulting from
.:.: operating, investing, and financing activities in order to get the ending cash balance which
. :he same as the amount of the cash account presented in the statement of financial position.
', . :ice that the F450,000 cash balance as of December 31 is the balance of the cash account in the
, .--:ement of financial position.

Clossificotion of Cosh Flows According to Activities F@

 The Statement of Cash Flows summarizes the cash receipts and cash disbursements
for the accounting period. It summarizes the cash activities of the business by classiflring
cash inflows [receipts) and cash outflows (payments) into operating, investing, and
financing activities. It shows the net increase or decrease of cash in a given period and the
cash balance at the end of the period. This allows management to assess the ability of the
business to generate cash and project future cash flows.

Components of the Statement of Cash Flows classified according to activities:

a. )perating Activities - the cash inflows [receipts) and the cash outflows [payments)
arising from the normal operations of the business

b. Investing Activities - the cash inflows freceipts) and the cash outflows [payments)
from the purchase and sale of property and equipment, investment in debt or trading
. securities,lending money and collection of the principal amount of the money loaned.

c. Financing Activities - the cash inflows [receipts) and the cash outflows [paymentsJ
from the owners and creditors of the business

€ Test Your Understonding

1. What is a cash flow statement?

2. What are the three components of the cash flow statement?

THE STATEMENT OF CASH FLOWS

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 DRrrt 1

The following data are taken from the records of fuan to Go Sales. Write the cash flow
rts
activity for each of the following transactions.
no

rd
he Additional investment of Mr. fuan P200,000
he Purchased transportation equipment 120,000
Paid loan to Philippine Bank 30,000
Cash sales 50,000
Paid rent for the month 23,000
sJ Paid utilities for the month 8,000
Purchased office supplies 2,000
Paid insurance for the year 20,000
sJ
Cash withdrawal of Mr. |uan 15,000
ng
Paid employees salaries 65,000
rd.

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Clossificotion of Cosh Flows According to Activities F@

 II

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Lel's Hove Exercises
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Write Op - if the cash flow activity is operating

Inv - if the cash flow activity is investing
Fin - if the cash flow is financing

NOT - if the item is not a cash flow activity

I

1. Proceeds from sale of building

2. Payment of principal loan to Allied Bank

I
3, Cash collection from customers

4. Cash sale of company assets

5. Collection oI cash interest

6. Payment of income tax

7. Cash received from rent of building

B. Purchase of building

9. Payment of accounts payable

10. Proceeds from sale of land

1,1. Payment of bank loan

1,2. Rent received from lease of business property

13. Royalties received from sale of CD

1,4. Depreciation expense

15. Collection of accounts receivable

76. Provision for uncollectible accounts

17. Payment of rent

18. Payment of accounts payable

79. Collections from customers for legal services rendered

oF .ASH Flovvs
@-f THE .TATEMENT

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 20. Additional investment of owner

21. Purchase of store supplies

22. Withdrawal of owner

23. Payment of employees' salaries

24. Payment of interest on bank loan

25. Proceeds of bank loan

26. Proceeds from sale oftruck

27. Interest income from bank account

28, Payment of government taxes

29. Purchase of company tools

30. Dividend received from stock investment

D etermine the net cash flow from operating activities of Launcelot Company for 2Ot7 given
the following data.

Cash paid to suppliers F39,000

Cash dividends received 15,500
Delivery Income receivable 99,000
Rent income receiv,ed 87,000
Cash paid for salaries 108,000
Collection from customers 399,500
Proceeds of Bank Loan 500,000
Cash paid for income tax 5,000
Cash paid for utilities 77,000
Interest received from bank deposits 3,980
Proceeds from sale of equipment 8,000
Bad debts expense 7,890
Cash paid for advertising 35,000
Commission income received 14,000
Collection of accounts 31,000

Let's Hove Exercises

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The following data are taken from the records of Pagong Delivery Services for the year 2018.
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Cash received
From customers F980,000
Collection of accounts 90,000
Proceeds of financing Ioan 420,000
Proceeds from sale offurniture 55,000
Dividends on stock 23,000
Commission income 11,000
Additional investment BB,OOO
Rent income 99,000

Cash paid
Purchase ofland 700,000
Interest on loan 45,000
Partial payment of financing loan 180,000
Operating expenses 310,000
Taxes and licenses 3,750

Cash balance beginning is P98,000.

Gain on sale of furniture is P5,000.

Required: Prepare a statement of cash flows then determine the following:

1,. Net cash flow from operating activities

2. Net cash flow from investing activities
3. Net cash flow from financing activities
4. Net increase/decrease in cash
5. Cash balance on December 31, 2018

THE STATEMENT OF CASH FLOWS

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2018.
Mr. Carlo Raulo established a consultancy firm. The following data are taken from the
records of C. Raulo Consultancy Services for the yeat 2O17.

Consultancy fees receivable from clients P500,000

Cash receipt from clients 600,000
Depreciation expense 40,000
Proceeds of Metrobank loan 350,000
Cash purchase ofvan 800,000
Provision for bad debts 28,000
Additional investment of C. Raulo 900,000
Dividends income received 23,000
Rent income received 32,000
Payment of operating expenses 975,000
Principal long-term Ioan paid 600,000
Asset withdrawal of owner 125,000
Proceeds from sale ofland 950,000

Cash balance on January L,201,7 is F308,000.

Required: Prepare a statement of cash flotvs then determine the following:

L. Net cash flow from operating activities

2. Net cash flow from investing activities

3. Net cash flow from financing activities

4. Net increase/decrease in cash

5. Cash balance on December 31',20!7

Let's Hove Exercises F@

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The following data are taken from the records of Butt I. Que for the year 2Ot7.

Legal fees received from clients F408,000

Depreciation expense 70,000
Proceeds of bank loan 504,000
Cash purchase ofland 1,100,000
Provision for bad debts 18,000
Additional investment of Atty. Que 300,000
Partial payment of bank loan 200,000
Commission income receivable 23,000
Research income received 32,000
Taxes and licenses payable 7,240
0perating expenses 360,000
Collection ofaccounts 600,000
Interest on bank loan paid 94,000
Proceeds from sale of equipment 860,000

Cash balance on |anuary 1,2017 is F200,000.

Required: Prepare a statement of cash flows then determine the following:

7. Net cash flow from operating activities

2. Net cash flow from investing activities
3. Net cash flow from financing activities
4. Net increase/decrease in cash
5. Cash balance on December 37,2017

oF CASH FL.WS
@-J THE STATEMENT
I. Describe the cash flow activity described by each of the following:

1. The cash inflows [receipts) and the cash outflows

[payments) from the owners and creditors of the
business

2. The cash inflows freceiptsJ and the cash outflows

[paymentsJ arising from the normal operations of the
business

3. The cash inflows [receiptsJ and the cash outflows

[payments) from the purchas e and sale of prop erty and
equipment, investment in debt or trading securities,
lending money, and collection of the principal amount
of the money loaned

II. The following data are taken from the records of Dr. Quack for the year 2O17.

Collection ofaccounts F 990,000

Cash Collectible from patients 2,600,000
Depreciation expense 30,000
Cash purchase of equipment l-l-0,000
Provision for bad debts 8,400
Dividends of stock investment received 14,000
Royalty income received 9,000
Rent income received 32,000
Operating expenses 180,000
Principal of bank loan paid 600,000
Interest on bank loan paid 24,000
Proceeds from sale of furniture 60,800

Cash balance on |anuary 1,,2017 is F188,000.

chapterTe$ l€
 Required: Prepare a statement of cash flows then determine the foJlowing:

1. Net cash flow from operating activities

2. Net cash flow from investing activities

3. Net cash flow from financing activities

4. Net increase/decrease in cash

5. Cash balance on December 3L,201.7

CASH FLCWS
@T THE STATEMENT OF