Statement of Cash
Flows
Ms. Rica Joy B. Estrada
Usefulness of the Statement of Cash Flows
Primary purpose is to provide information about cash receipts and cash disbursements.
Helps investors, creditors, and others assess the following:
1. The entity’s ability to generate future cash flows.
2. The entity’s ability to pay dividends and meet obligations
3. The reason for the difference between net income and net cash
provided (used) by operating activities.
4. The cash investing and financing transactions during the period.
Classifications of Cash Flows
Operating Activities
Include the cash effects of transactions that create
revenues and expenses. They thus enter the determination of
net income.
Investing Activities
Include (a) acquiring and disposing of investments and
property, plant, and equipment, and (b) lending money and
collecting the loans.
Financing Activities
Include (a) obtaining cash from issuing debt and
repaying the amounts borrowed, and (b) obtaining cash from
shareholders, repurchasing shares, and paying dividends.
Operating Activities
Income Statement Items
Cash inflows:
From Sale of Goods or Services
From Interest Received and Dividends Received
Cash outflows:
To Supplies for Inventory.
To Employees for Wages.
To Government for Taxes.
To Lenders for Interest.
To Others for Expenses.
Investing Activities
Changes in Investments and Non-Current Assets
Cash inflows:
From Sale of Property, Plant, and Equipment.
From Sale of Investments in Debt or Equity Securities of Other Entities.
From Collections of Principal on Loans to Other Entities.
Cash outflow:
To Purchase Property, Plant, and Equipment.
To Purchase investments in Debt or Equity Securities of Other Entities.
To make loans to other entities.
Financing Activities
Changes in Non-Current Liabilities and Equity
Cash inflows:
From Sale of Ordinary Shares.
From Issuance of Long-term Debt (Bonds and Notes)
Cash outflow:
To Shareholders as Dividends.
To Redeem Long-term Debt or Reacquire Ordinary Shares (Treasury Shares).
COMPANY NAME
Statement of Cash Flows
For the Year Ended December 31, 20xx
Cash flows from operating activities
(List of Individual items)
Net cash provided (used) by operating activities
Cash flows from investing activities
(List of individual inflows and outflows)
Net cash provided (used) by investing activities
Cash flows from financing activities
(List of individual inflows and outflows)
Php xxx
Php xxx
xxx
xxx
xxx
Net cash provided (used) by financing activities
Net increase (decrease) in cash
Cash at beginning of period
Cash at end of period
xxx
xxx
xxx
xxx
Note xx
Non-cash investing and financing activities
(List of individual non-cash transactions)
xxx
Preparing the Statement of Cash Flows – Direct Method
Operating Activities:
Cash received from customers
Dividend Received
Interest Received
(Cash paid to suppliers)
(Cash paid for operating expenses)
(Interest Paid)
(Income Tax Paid)
Cash provided (used) from Operating Activities
Cash received
from customers
=
Net +
Sales -
Cash paid for
=
suppliers
COGS
AR
AR
UR
UR
+
-
+
-
Cash Paid for
Operating Non-cash +
=
Operating Expenses
Expenses
Payments -
AP
AP
+
-
+ Recovery
- Write-off
Inventory
Inventory
Prepayments +
Prepayments -
Accrued Liab.
Accrued Liab.
1. Net Sales is $10,000,000
Accounts Receivable
Unearned Revenue
2019
$1M
$950k
Cash Received from Customer =
2020
$1.2M
$700k
$ 9,550,000
2. Cash Received from Customer is $8,000,000
2019
2020
Accounts Receivable
$1M
$1.4M
Unearned Revenue
$780k
$900k
Net Sales =
$ 8,280,000
1. Cost of Goods Sold is $1,800,000
2019
Accounts Payable
$600k
Inventory
$200k
Cash Paid to Supplier =
$ 1,930,000
2020
$550k
$280k
2. Cash Paid to Supplier is $2,400,000
2019
Inventory
$650k
Accounts Payable
$870k
Cost of Goods Sold =
$ 2,210,000
2020
$900k
$930k
Interest
Received
=
Interest +
Income -
Dividends
Received
Interest Receivable
Interest Receivable
Dividend +
= Income -
Dividend Receivable
Dividend Receivable
Interest
Interest +
=
Paid
Expense -
Discount
Amortization
Income Tax +
Income
=
Expense Tax Paid
+
-
Interest Payable
Interest Payable
Prepaid Interest +
Prepaid Interest Premium
+
Amortization
Income Tax Payable +
Income Tax Payable -
Deferred Tax Asset
Deferred Tax Asset
+
-
Prepaid Tax
Prepaid Tax
Deferred Tax Liability
Deferred Tax Liability
Preparing the Statement of Cash Flows – Indirect Method
Operating Activities:
Net Income
+ Loss on disposal of plant assets
- Gain on disposal of plant assets
+ Depreciation Expense, Depletion Expense, Amortization Expense
+ Decrease in Current Asset (Except Cash)
- Increase in Current Asset (Except Cash)
+ Increase in Current Liability
- Decrease in Current Liability
Cash provided (used) from Operating Activities
From accrual basis to cash
basis