STATEMENTOFCASHFLOWS

AStatementofCashFlowsi
sacomponentoff
inanci
alst
atement
ssummar
izi
ngt
heoper
ati
ng,i
nvest
ing,and
f
inancingact
ivi
ti
esofanent
it
y.

I
nsimplelanguage,t
hest
atementofcashf
lowspr
ovi
desi
nfor
mat
ionaboutt
hecashr
ecei
ptandcash
paymentsofanentit
ydur
ingaperi
od.

Anent i
tyshal
lpr
epar
eastatementofcashfl
owsandpresenti
tasani
ntegr
alpar
toft
hef
inanci
alst
atement
s
foreachperiodwhi
chfi
nancial
stat
ementsar
epresent
ed.

Thepri
marypurposeofastat
ementofcashfl
owsi
stopr
ovi
der
elevanti
nfor
mat
ionaboutcashr
ecei
ptand
cashpayment
sofanentit
yduringaper
iod.

CASHANDCASHEQUI
VALENTS

Thestatementofcashf
lowsi
sdesi
gnedt
opr
ovi
dei
nfor
mat
ionaboutt
hechangei
nanent
it
y'scashandcash
equi
valents.

Cashcompr
isescashonhandanddemanddeposi
ts.

Cashequi
val
ent
sareshort
-ter
m hi
ghlyl
i
quidinvest
mentsthatar
er eadi
l
yconver
ti
blei
nknownamountof
cashandwhi
charesubj
ecttoaninsi
gni
fi
cantri
skofchangeinvalue.

PAS7,paragr
aph7,pr
ovidest
hatani
nvest
mentnor
mall
yqual
i
fi
esasacashequi
val
entonl
ywheni
thasa
shor
tter
m matur
it
yoft
hreemonthsorl
essfr
om t
hedat
eofacqui
si
ti
on.

I
not
herwor
ds,t
hei
nvest
mentmustbeacqui
redt
hreemont
hsorl
essf
rom dat
eofacqui
si
ti
on.

Exampl
esofCashEqui
val
ent
s
a.Thr
eemonthBSPtreasur
ybil
l
b.Thr
ee-
yearBSPtr
easurybil
lpurchasedt
hreemont
hsbeforedat
eofmat
uri
ty
c.Thr
ee-
monthti
medeposi t
d.Thr
ee-
monthmoneymar ketinst
rumentorcommerci
alpaper

CLASSI
FICATI
ONOFCASHFLOWS

Cashf
lowsar
einf
lowsandout
fl
owsofcashandcashequi
val
ent
s.

Thestatementofcashf
lowsshal
lrepor
tcas
hfl
owsdur
ingt
heper
iodcl
assi
fi
edasoper
ati
ng,i
nvest
ing,and
fi
nancingact
ivi
ti
es.

OPERATI
NGACTI
VITI
ES

Operat
ingacti
vi
ti
esarethecashflowsderi
vedpri
maril
yfr
om thepri
nci
palr
evenueproducingact
ivi
ti
esoft
he
ent
it
y.
I
notherwords,oper
ati
ngactivi
ti
esgeneral
lyr
esul
tfr
om tr
ansacti
onsandotherevent
sthatent
eri
ntothe
det
erminat
ionofneti
ncomeorl oss.

Examplesofcashflowsf r
om oper ati
ngact i
vi
ti
esar e:
a.Cashr ecei
ptfrom saleofgoodsandr enderingofser vi
ces
b.Cashr ecei
ptfrom royalt
ies,rentalfees,commi ssi
onsandot herrevenue
c.Cashpaymentt osuppliersforgoodsandser vices
d.Cashpaymentf orsell
i
ng,admi nist
rati
veandot herexpenses
e.Cashr ecei
ptsandcashpayment sofani nsuranceent i
tyforpremiumsandclai
ms,annui
ti
esandot her
pol
icybenef
its
f. Cashpayment sorrefundsofi ncomet axesunl essspecif
ical
l
yi dent
if
iedwi
thfi
nanci
ngandinvest
ing
act
ivi
ti
es
g.Cashr ecei
ptsandpayment sforsecur i
ti
eshel dfortr
ading

I
NVESTI
NGACTI
VITI
ES

I
nvest
ingact
ivi
ti
esarethecashfl
owsder
ivedfr
om t
heacqui
si
ti
onanddi
sposal
ofl
ong-
ter
m asset
sandot
her
i
nvest
mentsnotincl
udedincashequi
val
ent.

Asas
impl
egui
de,i
nvest
ingact
ivi
ti
esi
ncl
udecashf
lowsf
rom t
ransact
ionsi
nvol
vi
ngnonoper
ati
ngasset
s.
Examplesofcashf l
owsf rom invest
ingact i
vi
ties:
a.Cashpaymentt oacqui reproperty,plantandequi pment,i
nt angiblesandot herlong-term assets
b.Cashr eceiptsfr
om sal eofproperty,plantandequi pment,intangiblesandot herlong-term assets
c.Cashpayment stoacqui reequityordebti nstr
ument sofotherent i
ties(currentandlong-term
i
nvestments)
d.Cashr eceiptsfr
om sal eofequityordebti nstr
ument sofotherent i
ties
e.Cashadvancesandl oanstoot herpar t
iesotherthanadvancesandl oansmadebyf inancial
i
nsti
tut
ions
f. Cashreceiptsfr
om r epaymentofadvancesandl oansmadet oot herpar t
ies
g.Cashpaymentf orfut ur
econt r
act,forwardcont ract,opti
oncont ractandswapcont ract
h.Cashr eceiptforfuturecontr
act,forwar dcontract,optioncont r
actandswapcont ract

FI
NANCI
NGACTI
VITI
ES

Fi
nanci
ngact
ivi
ti
esar
ethecashf
lowsder
ivedf
rom t
heequi
tycapi
tal
andbor
rowi
ngsoft
heent
it
y.

I
notherwor
ds,f
inanci
ngacti
vi
ti
esaret
hecashf l
owsthatr
esul
tfr
om t
ransact
ions:
a.Betweentheentit
yandtheowner-equi
tyfi
nanci
ng
b.Betweentheentit
yandthecr
edit
or-debtfi
nanci
ng

I
nasimpleguide,f
inanci
ngact
ivi
ti
esi
ncl
udet
hecashf
lowsf
rom t
ransact
ionsi
nvol
vi
ngnont
radel
i
abi
l
it
ies
andequi
tyofanentit
y.

Exampl
esofcashflowfrom fi
nancingactiviti
es:
a.Cashrecei
ptsfr
om issuanceofor dinaryandpr ef
erenceshares
b.Cashpaymenttoacqui r
etreasuryshar es
c.Cashrecei
ptsfr
om issui
ngdebent ur es,l
oans,notes,bonds,mort
gages,andothershort
-ter
m orl
ong-
t
erm borr
owings
d.Cashpaymentsforamountbor r
owed
e.Cashpaymentsbyal easeef ort
her eductionoftheoutstandi
ngpri
nci
palleasel
iabi
li
ty

Cashpaymentst
oset t
les
uchobligat
ionsast
radeaccount
sandnot
espayabl
e,i
ncomet
axpayabl
e,accr
ued
expensesar
eoperat
ingacti
vi
ti
es,notfi
nanci
ngact
ivi
ti
es.

I
l
lust
rat
ion-
amount
sar
eassumed

Cashandcashequi
val
ent
-Januar
y1 3,
000,
000

Netcashpr ovi
dedbyoper at
ingact
ivi
ti
es
Cashr eceivedf r
om cust
omer s 12,000,000
Rentreceived 1,000,000
I
nterestreceived 1,500,000
Divi
dendsr eceived 2,000,000
Cashpai dt osuppli
ers (
8,000,000)
Salar
iespai d (
2,900,000)
I
nsurancepai d (
100,000)
I
nterestpaid (500,000)
I
nconet axpai d (
2,500,000) 2,
500,
000

Netcashusedininvest
ingacti
vi
ti
es
Cashpaidforl
and (
2,000,000)
Cashrecei
vedfrom sal
eofequipment 800,000
Cashrecei
vedfrom sal
eofinvest
ment 700,000 (
500,
000)

Netcashprovi
dedbyf i
nanci
ngacti
vi
ti
es
Cashrecei
vedfr om issueofshar
es 3,000,000
Cashrecei
vedfr om bankloan 4,500,000
Cashpaidfordividends (
3,500,000)
Cashpaidfortr
easur yshares (
1,600,000) 2,
400,
000

Cashandcashequi
val
ent
-December31 P7,
400,
000
Pr
esent
ati
onofOper
ati
ngAct
ivi
ti
es

1
.Di
rectMet
hod-usei
ncomput
ingt
heact
ual
cashr
ecei
vedandcashpai
d

A.Col
l
ect
ionofcashorcashs
ales

Accountsreceivabl
e,beginni
ng XXX
Add:Sales(net) XXX
Less:Accountsreceivabl
e,end (
XXX)
Coll
ecti
onfrom customers XXX

B.Pur
chases

Accountspayable,beginni
ng XXX
Add:Purchases(net) XXX
Less:Accountspayable,end (
XXX)
Paymenttosuppl i
ers XXX

C.I
ncome

I
ncome XXX
Add:AccruedI
ncome,beg XXX
Deferr
edincome,end XXX
Less:Accr
uedincome,end (
XXX)
Deferr
edincome,beg (
XXX)
Coll
ecti
onofcashrecei
pt XXX

D.Expense

Expense XXX
Add:Accr uedexpense,beg XXX
Prepaidexpense,end XXX
Less:Accruedexpense,end (
XXX)
Prepaidexpense,beg (
XXX)
Coll
ecti
onofcashr eceipt XXX

2.I
ndi
rectMet
hod-usei
ncomput
ingt
hei
ncr
easeanddecr
easeofcur
rentasset
sandcur
rentl
i
abi
l
it
ies

I
fthere'
sani ncreaseinbothcurrentassetandcurr
entliabi
li
ti
es,t
heamountofcur rentasseti
ncreasedwi l
lbe
deductandamounti ncr
easedbycur rentli
abil
i
tywi
llbeaddt ooperati
ngactivit
ies.
Otherwise,i
fthere'
sandecr easeinbothcur r
entas
setandcur rentl
i
abil
it
ies
,t heamountofcur rentasset
decreasedwi l
lbeaddandamountdecr easedbycurrentli
abi
li
tywil
lbededuct edtooper at
ingacti
vit
ies.

I
l
lust
rat
ion-f
oroper
ati
ngact
ivi
ti
esonl
y.Thef
f.i
nfor
mat
ionwi
l
lbeusedf
orbot
hmet
hod.

Si
mpl
eCompanypr
ovi
dest
hef
f.compar
ati
vestat
ementoff
inanci
alposi
ti
onandi
ncomest
atementf
or201
7.
ASSETS 2016 2017

Cash P1,900,000 P3,100,000

Accountsreceivabl
e 350,000 950,000
I
nventory 150,000 200,000
Prepai
dinsurance 25,000 20,000
Propert
y,plantandequipment 2,000,000 2,000,000
Accumulateddepr eci
ati
on (500,000) (550,000)
Patent 50,000 40,000
TOTALASSETS P3,975,000 P5.760,000

LI
ABI
LITI
ESANDEQUI
TY

AccountsPayabl e P150,000 P220,000

Accruedsalariespayabl
e 20,000 35,000
Accruedint
er estpayabl
e 1
5,000 1
0,000
I
ncomet axpayabl e 250,000 350,000
Unearnedrenti ncome 40,000 90,000
Mor t
gagepayabl e 500,000 500,000
Sharecapit
al 2,
000,000 2,
000,000
Retai
nedear nings 1,
000,000 2,
555,000
TOTALLIABI LITI
ESANDEQUI
TY P3,
975,000 P5.
760,000
 IncomeStat
ement
Fort
heyearendedDecember31
,201
7

Sales P6,
500,
000
Costofsal es :
I
nventor y-Januar
y1 P1 50,000
Purchases 3,200,000
Goodsavai l
abl
eforsal
e 3,350,000
I
nventor y-December31 (200,000) (
3,150,000)
Grossincome 3,
350, 000
Rentincome 1 20,000
Totali
ncome 3,
470, 000
Expenses:
Salari
es P950,
000
I
nsurance 40,
000
Otherexpenses 500,
000
Depreci ati
on 50,
000
Amor t
izat i
onofPat
ent 10,
000
I
nterestexpense 55,
000 (
1,605,000)
I
ncomebef oretax 1,865,000
I
ncomet ax (350,000)
Netincome P1 ,
515,00

1
.Usi
ngDi
rectmet
hod:

Accountsreceivabl
e,beginni
ng 350,000
Add:Sales(net) 6,500,000
Less:Accountsreceivabl
e,end (950,000)
Coll
ecti
onfrom customers P5,900,000

Accountspayable,beginni
ng 150,000
Add:Purchases(net) 3,200,000
Less:Accountspayable,end (220,000)
Paymenttosuppl i
ers P3,130,000

RentI
ncome 120,000
Unear
nedrenti
ncome,end 90,000
Unear
nedrenti
ncome,beg (
40,000)
Renti
ncomerecei
ved P170,000

Sal
ari
es 950,000
Accr
uedsal
ari
espayabl
e,beg 20,000
Accr
uedsal
ari
espayabl
e,end (
35,000)
Sal
ari
espai
d P935,000

I
ncomet
ax 350,000
I
ncomet
axpayabl
e,beg 250,000
I
ncomet
axpayabl
e,end (350,000)
I
ncomet
axpai
d P250, 000

I
nsuranceexpense 40,000
Prepai
dinsur
ance,end 20,000
Prepai
dinsur
ance,beg (25,000)
I
nsurancepaid P35, 000

I
nter
estexpense 55,000
Accr
uedinterestpayabl
e,beg 15,000
Accr
uedinterestpayabl
e,end (1
0,000)
I
nter
estpaid P60,000
Oper ati
ngact i
vit
ies
Collecti
onf rom cust
omers 5,900,000
Paymentt osupplier
s (3,
130,000)
Rentr eceived 170,000
Salariespaid (
935,000)
I
nsur ancepai d (
35,000)
I
nter estpaid (
60,000)
I
nconet axpaid (
250,000)
Otherexpenses (
500,000)
Netcashpr ovidedbyoperat
ingact
ivi
ti
es P1 ,
160,000

2.Usi
ngI
ndi
rectMet
hod

Neti
ncome P1
,515,
000
Amort
izat
ionofpat
ent 10,
000
Depr
eciat
ion 50,
000

I
ncreaseinAccountsreceivable (
600, 000)
I
ncreaseinInvent
ory (
50, 000)
DecreaseinPrepai
dinsurance 5,000
I
ncreaseinAccountsPayabl e 70, 000
I
ncreaseinAccruedsalari
espayable 1 5,000
DecreaseinAccruedinter
estpayabl
e (5,000)
I
ncreaseinIncometaxpayabl e 100, 000
I
ncreasedinUnearnedRentI ncome 50, 000
Netcashprovidedbyoper ati
ngacti
vi
ti
es P1,
160, 000

Astosee,t
hecomputednetcashpr
ovi
dedbyoper
ati
ngact
ivi
ti
esi
ndi
rectmet
hodi
sequal
int
heamount
computedi
nindi
rectmet
hod.