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Fundamentals of
Accountancy, Business and
Management 2
Quarter 1 – Module 5:
Components and Structures of
Cash Flow Statement (CFS)
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Fundamentals of Accountancy, Business and Management 2 – Grade 12
Alternative Delivery Mode
Quarter 1 – Module 5: Components and Structures of Cash Flow Statement (CFS)
First Edition, 2020

Republic Act 8293, section 176 states that: No copyright shall subsist in any work
of the Government of the Philippines. However, prior approval of the government agency or
office wherein the work is created shall be necessary for exploitation of such work for profit.
Such agency or office may, among other things, impose as a condition the payment of
royalties.

Borrowed materials (i.e., songs, stories, poems, pictures, photos, brand names,
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Every effort has been exerted to locate and seek permission to use these materials from
their respective copyright owners. The publisher and authors do not represent nor claim
ownership over them.

Published by the Department of Education, Division of Palawan

Schools Division Superintendent:
Natividad P. Bayubay, CESO VI
Assistant Schools Division Superintendents:
Loida P. Olavario, Ph.D.
Felix M. Pamaran

Development Team of the Module

Writers: Hailyn Bernardo – Ibrahim
Content Editors: Edheson M. Gapad
Mark G. Javillonar
Language Editor: Marianne R. Valdez
Reviewers: Eric N. Quillip
Layout Artist: Mark G. Javillonar
Management Team: Aurelia B. Marquez
Rodgie S. Demalinao
Eric N. Quillip

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Fundamentals of
Accountancy, Business
and Management 2
Quarter 1 – Module 5:
Components and Structures of
Cash Flow Statement (CFS)

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Introductory Message
For the facilitator:

Welcome to the Fundamentals of Accountancy, Business and Management 2 –

Grade 12 Modular Distance Learning (MDL) Self-Learning Module on Components
and Structures of Cash Flow Statement (CFS)!

This module was collaboratively designed, developed and reviewed by educators

from public institution to assist you, the teacher or facilitator in helping the
learners meet the standards set by the K to 12 Curriculum Most Essential Learning
Competencies (MELCs) in the “New Normal” situation while overcoming their
personal, social, and economic constraints in schooling.

This learning resource hopes to engage the learners into guided and independent
learning activities at their own pace and time. Furthermore, this also aims to help
learners acquire the needed 21st century skills while taking into consideration
their needs and circumstances.

In addition to the material in the main text, you will also see this box in the body of
the module:

Notes to the Teacher

This contains helpful tips or strategies
that will help you in guiding the learners.

As a facilitator, you are expected to orient the learners on how to use this module.
You also need to keep track of the learners' progress while allowing them to
manage their own learning. Furthermore, you are expected to encourage and assist
the learners as they do the tasks included in the module.

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For the learner:

Welcome to the Fundamentals of Accountancy, Business and Management 2–

Grade 12 Modular Distance Learning (MDL) Self-Learning Module on Components
and Structures of Cash Flow Statement (CFS)!

This module was designed to provide you with fun and meaningful opportunities
for guided and independent learning at your own pace and time. You will be
enabled to process the contents of the learning resource while being an active
learner.

This module has the following parts and corresponding icons:

What I Need to Know This will give you an idea of the skills or
competencies you are expected to learn in
the module.

What I Know This part includes an activity that aims to

check what you already know about the
lesson to take. If you get all the answers
correct (100%), you may decide to skip this
module.

What’s In This is a brief drill or review to help you link

the current lesson with the previous one.

What’s New In this portion, the new lesson will be

introduced to you in various ways; a story, a
song, a poem, a problem opener, an activity
or a situation.

What is It This section provides a brief discussion of

the lesson. This aims to help you discover
and understand new concepts and skills.

What’s More This comprises activities for independent

practice to solidify your understanding and
skills of the topic. You may check the
answers to the exercises using the Answer
Key at the end of the module.

What I Have Learned This includes questions or blank

sentence/paragraph to be filled in to process
what you learned from the lesson.

What I Can Do This section provides an activity which will

help you transfer your new knowledge or
skill into real life situations or concerns.

Assessment This is a task which aims to evaluate your

level of mastery in achieving the learning
competency.

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At the end of this module you will also find:

References This is a list of all sources used in

developing this module.

The following are some reminders in using this module:

1. Use the module with care. Do not put unnecessary mark/s on any part of
the module. Use a separate sheet of paper in answering the exercises.
2. Don’t forget to answer What I Know before moving on to the other activities
included in the module.
3. Read the instruction carefully before doing each task.
4. Observe honesty and integrity in doing the tasks and checking your
answers.
5. Finish the task at hand before proceeding to the next.
6. Return this module to your teacher/facilitator once you are through with it.
If you encounter any difficulty in answering the tasks in this module, do not
hesitate to consult your teacher or facilitator. Always bear in mind that you are
not alone.

We hope that through this material, you will experience meaningful learning
and gain deep understanding of the relevant competencies. You can do it!

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What I Need to Know

This module was designed and written with you in mind. It is here to help you
understand the components and structures of Cash Flow Statement (CFS). The
scope of this module permits it to be used in many different learning situations.
The language used recognizes the diverse vocabulary level of students. The lessons
are arranged to follow the standard sequence of the course. But the order in which
you read them can be changed to correspond with the textbook you are now using.

The module is composed of one lesson, namely:

• Lesson 1 – Components and Structures of Cash Flow Statement (CFS)

After going through this module, you are expected to:

1. Define and explain Cash Flow Statement (CFS);
2. Identify the components and structures of the CFS;
3. Recognize and explain the two approaches for preparing the CFS;
4. Reflect on the necessity of preparing the CFS; and
5. Prepare the CSF.

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What I Know

Directions: Choose the letter of the best answer. Write the chosen letter on a
separate sheet of paper.

1. Which element of financial statement provides information about the cash

receipts and cash payments of an entity during a period?
a. Statement of financial position c. Statement of changes in equity
b. Statement of comprehensive income d. Statement of cash flows

2. Which component of cash flow statement involves providing services, producing

and delivering goods and the cash effects of transactions directly related to the
main revenue – producing activities of the company?
a. Operating activities c. Financing activities
b. Investing activities d. All of the above

3. The decrease in the value of tangible assets such as building, furniture and
equipment is called what?
a. Accrued expense c. Amortization
b. Depreciation d. Mortgage

4. What do you call an amount owed to others for unpaid expenses?

a. Accrued liabilities c. Unearned revenues
b. Depreciation expense d. Accounts payable

5. Payment of insurance premiums in advance would increase the amount of which

account?
a. Prepaid expense c. Accrued income
b. Unearned income d. Accrued expense

6. Which of the following is an example of a financing activity?

a. Acquiring land c. Paying off a loan
b. Employing workers d. Selling equipment

7. The following are categorized under of Operating Activities, EXCEPT:

a. Cash received from clients
b. Payments to suppliers
c. Payments to acquire office equipment
d. Cash payment to employees

8. What would be the effect of Payment to Settle Note Payable to the company’s
cash flow under financing activities?
a. Decrease c. No effect
b. Increase d. None of the Above

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9. This activity includes cash transactions related to obtaining and selling of
property and equipment and other non - current assets.
a. Operating activity c. Financing activity
b. Investing activity d. Cash flow activity

10. Which of the following is an example of an investing activity?

a. Obtaining bank loan c. Producing goods and services
b. Paying taxes to the government d. Purchasing a building

11. All are example of operating activity EXCEPT:

a. Receipts from sales of goods
b. Payments for taxes
c. Payments to acquire debt securities
d. Receipts from customers

12. This financial statement shows the net increase/decrease in cash during the
period and the cash balance at the end of the period.
a. Statement of financial position
b. Statement of comprehensive income
c. Statement of changes in equity
d. Statement of cash flows

13. What do you call the element of financial statement prepared based on
information from the income statement and the balance sheet?
a. Statement of financial position
b. Statement of comprehensive income
c. Statement of changes in equity
d. Statement of cash flows

14. Which of the following is cash outflow from operating activities?

a. Payment for interest expense
b. Payment to acquire property and equipment
c. Payment to settle notes payable
d. Payment to owners in the form of withdrawals

15. As per Philippine Accounting Standards (PAS) No. 7, enterprises are

encouraged to report cash flows from operating activities using which method?
a. Direct method c. both a and b
b. Indirect method d. none of the above

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We all know that each and every one is now experiencing and facing hard times
due to the impact of Covid19 pandemic. In fact, our economy is the most affected
as the pandemic led business establishments of cutting off their expenses
proportion to their declining sales and income.

In the business world, small businesses rarely produce a cash flow report, as profit
and loss report is sufficient for their needs. It is unlikely that small- scale
businesses will involve complex non – cash transactions that would warrant such
information because they considered it as a waste of time and money to have an
accountant prepare a report that would be of little use to anyone. On the other
hand, for large entities such as Nike, Toyota, and Microsoft, having a cash flow
report is imperative. Such companies will often have a significant amount of non –
cash transaction, sometimes even billions of dollars in revenue that is simply owed
to them but hasn’t been received in cash yet. In this situation, a profit and loss
statement is not always sufficient, and a cash flow report is valuable to many
users, such as banks and shareholders.

What’s In

In your Fundamentals of Accounting, Business and Management 1, you have

learned the meaning of the accrual and depreciation. As you go further with your
study of accounting, you should bear in mind that preparation of financial
statements is guided by concepts and assumptions which are very foundations of
the generally accepted accounting principles governing its preparation. One of
these assumptions is the “accrual basis assumption” in this assumption, income is
recognized when earned regardless when received and expense is recognized when
incurred regardless when paid. In the long run, when an enterprise purchased
building, furniture and equipment for its operation, keep in mind that the value of
such assets are subject to depreciation.

Accounting provides business owners and management with information essential

to the efficient conduct and evaluation of its activities. Financial statements are
communicated to different users such as investors, lenders, suppliers, creditors,
customers and government that analyzed and interpreted by accountants who are
professional and knowledgeable in this field where accounting justifies its
importance in the global business world. Financial statements are vital to its users
in making a sound economic decision. Thus, it serves its purpose when it is
communicated and prepared on time.

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What’s New

Activity 1: My Personal CFS

Directions:
1. Compute your monthly allowance (Formula: daily allowance x number of days
in a month) and write it on the allotted column/section on the table below.
2. Compute for any liabilities that you got from your classmates, friends, and
family members on its column section.
3. Compute for and write your expenses on food, transportation etc. on its column
section. (Formula: daily expenses x no. of days in a month).
4. Deduct the amount you spent from the amount of your allowance to get the
amount of your remaining cash then write your answer on its column.

Month Monthly Liabilities Expenses Remaining

Allowance Cash
Food Transpo Other
rtation
June
July
August
September
October
TOTAL
How do your allowance, liabilities and expenses are associated with the statement of
cash flows? Answer the given question in the space provided.

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What is It

The Cash Flows Statement (CFS)

The statement of cash flows is a formal statement that provides information about
the cash receipts (inflows) and cash payments (outflows) of an entity from
operating, investing, and financing activities during the period. Unlike the SCI, this
statement shows cash transaction only while the latter follows accrual principle.
This statement is prepared based on information from the income statement and
balance sheet. It also portrays how company has spent its cash. As per Phil.
Accounting Standards (PAS) No. 7, enterprises are encourage to report cash flows
from operating activities using direct method but the indirect method is acceptable.

The Three Major parts of CFS

1. Operating Activities are generally the cash effects of transactions and other
events that enter into the determination of profit or loss. It usually involves
day – to – day transaction, providing service and delivering goods.
2. Investing Activities include making and collecting loans, activities like
acquiring and disposing investments in debt or equity securities and
obtaining and selling of property and equipment.
3. Financing Activities are the net amount of funding a company generates in
a given period of time to finance its business usually include obtaining
resources from owners and creditors. Hence, cash activities under this
section are deal with debt and equity.

Direct vs. Indirect Approach of CFS

Cash flows from operating activities can be presented using either direct or indirect
method. If the entity’s net cash used in operating activities is obtained by adding
individual operating cash inflows and then subtracting the individual operating
cash outflows, then the method used by the entity is direct method. However, if the
net cash provided by operating activities was not resulting from cash transactions
but by adjusting profit for income and expenses items, then the method used by
the entity is indirect method.

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LEARNING IS FUN COMPANY
HEADING CASH FLOW STATMENT
FOR THE YEAR ENDED DECEMBER 31, 2019

Cash flows from Operating Activities OPERATING ACTIVITIES

Receipts from customers P 1, 000, 000

Payments to suppliers (600, 000)

Net Cash generated by Operating Activities P 400, 000

Cash flows from Investing Activities INVESTING ACTIVITIES

Purchases of Property and Equipment P (250, 000)

P (250, 000)
Net Cash used in Investing Activities

Cash flows from Financing Activities FINANCING ACTIVITES

Long term loan from a bank P 400, 000
Additional investment from owner 100, 000
Withdrawal by owner (80, 000)
Net Cash used in Financing Activities P 420, 000

Net increase in cash and cash equivalents P 570, 000

Cash, January 1, 2019 100, 000
V
Cash, December 31, 2019 P 670, 000

Note that the method used in this example is direct method.

Net change in cash or net cash flow (increase/decrease) is the net amount of
change in cash either it is an increase or decrease for the current period brought by
operating, investing and financing activities.
Beginning balance is the balance of the cash account at the beginning of the
accounting period.
Ending balance is the balance of the cash account at the end of the accounting
period computed using the beginning balance + the net change in cash for the
current period.
Cash flow statement should only include cash transactions and that the net
income/loss of the company can contain non – cash transactions such as
depreciation. Changes in current assets and liabilities are included if they are
related to revenues and expenses which were included in the net income/loss even
if they were non-cash transactions or they affected cash but was not part of the net
income/loss (accrual, prepaid, unearned).

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INDIRECT METHOD

HEADING

Cash from Operating Activities OPERATING ACTIVITIES

Net Income P 250, 000
Add back: Depreciation 20, 000
Loss on sale of property and 10, 000
equipment P 280, 000

(Increase)/Decrease in Trade & Other (40, 000)

Receivables – Net

Increase /(Decrease) in Trade & Other 60, 000

Payables
P 300, 000
Net Cash generated by Operating Activities

INVESTING ACTIVITIES
P (120, 000)

P(120, 000)

FINANCING ACTIVITIES

P 300, 000

100, 000

(80, 000)

P320, 000

Net increase in cash and cash equivalents P500, 000

Cash, January 1, 2019 P100, 000

Cash, December 31, 2019 P600, 000

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What’s More

Activity 2: Classifying Cash Transactions

Directions: Categorize each cash flow as (O) for operating, (I) for investing, (F) for
financing. Write your answer on the space provided below.

1. Cash received from sale of building.

2. Cash paid for salaries.
3. Cash received for interest on a note receivable.
4. Cash paid to acquire a new truck.
5. Cash loaned out to a customer in the form of long-term note
6. Cash received for a service rendered.
7. Cash paid for interest.
8. Cash paid for insurance on equipment.
9. Cash received from a debtor representing payments
of principal.
10. Cash paid out to acquire a building.
11. Cash paid for taxes.
12. Cash received from borrowings.
13. Cash paid to acquire equity securities.
14. Cash paid for utilities.
15. Cash received from investments by owner.

Activity 3: Compute Me!

Direction: Study the given data below and compute for (1) the cash generated/used
in financing activities, (2) the net change in cash for the year, and (3) prepare the
CFS for the year. Write your answer on a separate worksheet.

Learning is Fun Company has presented the following in order to aid the account
in preparing CFS during the month.
a. Net income: P200, 000
b. Depreciation expense: P25, 000
c. Gain on sale on 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

1. Compute for the cash generated/used in financing activities. (5 pts)

2. Based on the given above, compute for the net change in cash for the year. ( 5
pts)

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3. If the ending balance of cash account is P700, 000, prepare the CFS for the
year. ( 15 pts)

What I Have Learned

ACTIVITY 4: Fill in the Blanks

Direction: Complete the sentences below by filling in the blanks with the correct
word/s or phrase/s.

1. The cash flows statement has three components, namely: ,

, and .
2. The element of financial statement that provides information about cash
transactions of an entity during the period of time is called .
3. Under PAS No. 7, the enterprises are encouraged to report cash flows from
using but indirect method is acceptable.
4. This activity involves providing services, and producing and delivering goods is
known as .
5. Investing activity includes making and , activities like acquiring and
in debt or equity securities and obtaining and selling of
.
6. Cash activity under this section includes obtaining resources from owners and
creditor. This component of cash flows statement is called .
7. The net amount of change in cash either it is an increase or decrease for the
period brought by cash transactions activities is known as .
8. The balance of the account at the beginning of the accounting period is called
.
9. Ending balance of the cash account is the balance at the of
accounting period.
10. Unlike statement of comprehensive income, cash flows statement shows
while the latter follows accrual principle.

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What I Can Do

Activity 5: Problem Solving

Directions: Read and analyze the problem below then do the following
requirements.
Assuming, you owned a sari-sari store and had a beginning cash amounting of
P50, 000 and the following transactions occurred during the month.
a. Purchase of goods. Paid in cash. 100, 000
b. Sales 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
Required:
a. Compute for your net cash flow generated/used in operating activities. (5
pts)
b. Compute for your net cash flow generated/used in investing activities. (5 pts)
c. Compute for your net cash flow used in financing activities. (5 pts)
d. Prepare a cash flows statement using direct method. ( 15 pts)

Activity 6: Answer Me
Direction: Answer the following questions on a separate sheet of paper.

1. What is statement of cash flows? Briefly explain.

2. Explain the three activities under cash flows statement.

3. Discuss the differences between the direct and indirect method of presenting
cash flows from operating activities.

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Assessment

Directions: Choose the letter of the best answer. Write the chosen letter on a
separate sheet of paper.

1. All are example of operating activity EXCEPT:

a. Receipts from sales of goods c. Payments for taxes
b. Payments to acquire debt securities d. Receipts from customers

2. As per Philippine Accounting Standards (PAS) No. 7, enterprises are encouraged

to report cash flows from operating activities using which method?
a. Direct method c. both a and b
b. Indirect method d. none of the above

3. What do you call the element of financial statement prepared based on

information from the income statement and the balance sheet?
a. Statement of financial position
b. Statement of comprehensive income
c. Statement of changes in equity
d. Statement of cash flows

4. Which of the following is an example of an investing activity?

a. Obtaining bank loan c. Producing goods and services
b. Paying taxes to the government d. Purchasing a building

5. Which of the following is cash outflow from operating activities?

a. Payment for interest expense
b. Payment to acquire property and equipment
c. Payment to settle notes payable
d. Payment to owners in the form of withdrawals

6. This activity includes cash transactions related to obtaining and selling of

property and equipment and other non - current assets.
a. Operating activity c. Financing activity
b. Investing activity d. Cash flow activity

7. This financial statement shows the net increase/decrease in cash during the
period and the cash balance at the end of the period.
a. Statement of financial position
b. Statement of comprehensive income
c. Statement of changes in equity
d. Statement of cash flows

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8. What do you call an amount owed to others for unpaid expenses?
a. Accrued liabilities c. Unearned revenues
b. Depreciation expense d. Accounts payable

9. The decrease in the value of tangible assets such as building, furniture and
equipment is called what?
a. Accrued expense c. Amortization
b. Depreciation d. Mortgage

10. Payment of insurance premiums in advance would increase the amount of

which account?
a. Prepaid expense c. Accrued income
b. Unearned income d. Accrued expense

11. What would be the effect of Payment to Settle Note Payable to the company’s
cash flow under financing activities?
a. Decrease c. No effect
b. Increase d. None of the Above

12. What is the element of financial statements that provides information about the
cash receipts and cash payments of an entity during a period?
a. Statement of financial position c. Statement of changes in equity
b. Statement of comprehensive income d. Statement of cash flows

13. Which of the following is an example of a financing activity?

a. Acquiring land c. Paying off a loan
b. Employing workers d. Selling equipment

14. Which component of cash flow statement involves providing services, producing
and delivering goods and the cash effects of transactions directly related to the
main revenue – producing activities of the company?
a. Operating activities c. Financing activities
b. Investing activities d. All of the above

15. The following are categorized under of Operating Activities, EXCEPT:

a. Cash received from clients
b. Payments to suppliers
c. Payments to acquire office equipment
d. Cash payment to employees

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References
Ballada, W., Basic Accounting Made Easy 20th Edition. Philippines: WIN BALLADA
and SUSAN BALLADA, 2015
Florendo, J.C. et. al,Teaching Guide for Senior High School FUNDAMENTALS OF
ACCOUNTANCY, BUSINESS, AND MANAGEMENT 2.Quezon City, Philippines:
Commission on Higher Education, 2016
https://courses.lumenlearning.com Date Retrieved: June 19, 2020
https://scalefactor.com/ask-the-experts/cash-flows Date Retrieved: June 22, 2020
https://www.arborinvesmentplanner.com Date Retrieved: June 23, 2020
www.shsph.blogspot.com

For inquiries or feedback, please write or call:

Department of Education – SDO Palawan

Curriculum Implementation Division Office

2nd Floor Deped Palawan Building
Telephone no. (048) 433-6392

Learning Resources Management Section

LRMS Building, PEO Compound
Telephone no. (048) 434-0099
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