ACC 109: Intermediate Accounting 4
Modules #23 & 24 Student Activity Sheet
Name: _________________________________________________________________ Class number: _______
Section: ____________ Schedule: ________________________________________ Date: ________________
Lesson title: Statement of Cash Flows Materials:
Learning Targets: Columnar, notebook, non-scientific
At the end of the module, students will be able to: calculator, ballpen, pencil, Student Activity
1. Define the following: (1) Operating activities, (2) Sheets
Investing activities, and (3) Financing activities.
2. State the classification of the following in a statement References:
of cash flows: (a) dividends received, (b) dividends Intermediate Accounting 2
paid, (c) interest paid and (d) interest received. 2020 edition by Zeus Vernon B. Millan
3. Prepare a statement of cash flows presenting cash
flows from operating activities using (a) direct method
and (b) indirect method.
A. LESSON PREVIEW/REVIEW
Introduction
Hi, future accountant! Welcome back to learning Intermediate Accounting 4. The immediately preceding
module presented the Statement of Changes in Equity where you prepared a Statement of Changes in Equity
and differentiated the Statement of Profit or Loss and Other Comprehensive Income and Statement of
Changes in Equity. As a continuation, this module introduces the Statement of Cash Flows. Related
standard: PAS 7 Statement of Cash Flows
B. MAIN LESSON
Content and Skill-Building
Statement of Cash Flows
• A statement of cash flows is a component of financial statements that provides information about the
historical changes in cash and cash equivalents of an entity by classifying cash flows during the period
according to
1. Operating activities,
2. Investing activities, and
3. Financing activities.
Core Principle
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ACC 109: Intermediate Accounting 4
Modules #23 & 24 Student Activity Sheet
Name: _________________________________________________________________ Class number: _______
Section: ____________ Schedule: ________________________________________ Date: ________________
Activities
1. Operating activities include transactions that enter into the determination of profit or loss. These
transactions normally affect income statement accounts.
2. Investing activities include transactions that affect long-term assets and other non-operating assets.
3. Financing activities include transactions that affect equity and non-operating liabilities.
Examples of cash flows from Operating Activities
1. Cash receipts from the sale of goods and the rendering of services;
2. Cash receipts from royalties, fees, commissions and other revenue;
3. Cash payments to suppliers for goods and services;
4. Cash payments to and on behalf of employees;
5. Cash receipts and cash payments of an insurance entity for premiums and claims, annuities and other
policy benefits;
6. Cash payments or refunds of income taxes unless they can be specifically identified with financing and
investing activities; and
7. Cash receipts and payments from contracts held for dealing or trading purposes (e.g., cash payments
for purchases of and cash receipts from sale of financial assets and financial liabilities that are held for
trading).
Examples of Cash Flows from Investing Activities
1. Cash payments for the acquisition and subsequent capitalizable costs for property, plant and equipment,
intangibles and other long-term assets.
2. Cash receipts from sales of property, plant and equipment, intangibles and other long-term assets;
3. Cash payments to acquire equity or debt instruments of other entities and interests in joint ventures (other
than payments for instruments considered as cash equivalents or held for dealing or trading purposes);
4. Cash receipts from sales of equity or debt instruments of other entities and interests in joint ventures
(other than receipts for those instruments considered to be cash equivalents and those held for dealing
or trading purposes);
5. Cash advances and loans made to other parties and repayments thereof (other than advances and loans
made by a financial institution).
Examples of Cash Flows from Financing Activities
1. Cash proceeds from issuing shares or other equity instruments;
2. Cash payments to owners to acquire or redeem the entity’s shares;
3. Cash proceeds from issuing debentures, loans, notes, bonds, mortgages and other short or long-term
borrowings;
4. Cash repayments of amounts borrowed; and
5. Cash payments by a lessee for the reduction of the outstanding liability relating to a finance lease.
This document is the property of PHINMA EDUCATION
ACC 109: Intermediate Accounting 4
Modules #23 & 24 Student Activity Sheet
Name: _________________________________________________________________ Class number: _______
Section: ____________ Schedule: ________________________________________ Date: ________________
Interests and Dividends
Reporting Cash Flows from Operating Activities
1. Direct method - shows each major class of gross cash receipts and gross cash payments.
2. Indirect method - adjusts accrual basis profit or loss for the effects of changes in operating assets and
liabilities and effects of non-cash items.
Indirect method
Skill Building Activity
TRUE OR FALSE
___________1. The net cash flow from operations must be reported using the direct method.
___________2. The direct method is generally favored by analysts and other users of cash flow statements.
___________3. Noncash items, such as depreciation expense, must be added to net income to arrive at net
cash provided by (used in) operating activities when the indirect method is used.
___________4. According to PAS 7 Statement of Cash Flows, an entity shall disclose the components of cash
and cash equivalents and shall present a reconciliation of the amounts in its statement of cash flows with the
equivalent items reported in the statement of financial position.
___________5. When using the indirect method, losses are subtracted from net income in computing cash
flow from operations.
___________6. The indirect method of reporting net cash flow from operations shows the operating cash
receipts and cash payments.
___________7. All transactions with investment securities, held for trading securities, FVOCI securities, and
amortized cost securities are reported in the investing section of the statement of cash flows.
This document is the property of PHINMA EDUCATION
ACC 109: Intermediate Accounting 4
Modules #23 & 24 Student Activity Sheet
Name: _________________________________________________________________ Class number: _______
Section: ____________ Schedule: ________________________________________ Date: ________________
___________8. The receipt of dividends should be classified as an operating activity only, while the payment
of dividends is to be classified as a financing activity only according to PAS 7.
___________9. When the indirect method is used, separate disclosure of interest paid and income taxes paid
is required.
___________10. Net cash provided by (used in) operating, financing, and investing activities are combined to
derive the amount of cash and cash equivalents at the end of the year.
Check for Understanding
PROBLEM-SOLVING.
1. The movements in the cash account of NONCHALANT COOL Co. during 20x2 are shown below.
Cash
beg. 200
Sales 6,000 3,800 Purchases
Interest income 20 1,200 Operating expenses
Rent income 270 30 Interest expense
Dividend income 40 70 Income taxes
Held for trading securities 800 100 Investment in FVOCI
Sale of old building 520 1,100 Purchase of equipment
Collection of non-trade note 60 130 Loan granted to employee
Proceeds from loan with a bank 1,600 240 Payment of loan borrowed
Issuance of shares 970 200 Reacquisition of shares
90 Dividends
3,520 end.
Requirement: Prepare the statement of cash flows of NONCHALANT COOL Co. for the year ended
December 31, 20x2. (Use Option 1 in classifying cash flows from operating activities.)
This document is the property of PHINMA EDUCATION
ACC 109: Intermediate Accounting 4
Modules #23 & 24 Student Activity Sheet
Name: _________________________________________________________________ Class number: _______
Section: ____________ Schedule: ________________________________________ Date: ________________
2. IMPECCABLE FLAWLESS Co. had the following information during 20x2:
Accounts receivable, January 1, 20x2 1,200
Accounts receivable, December 31, 20x2 800
Sales on account and cash sales 16,000
Bad debts expense 400
Accounts payable, January 1, 20x2 700
Accounts payable, December 31, 20x2 400
Cost of sales 8,000
Increase in inventory 1,800
Operating expenses on accrual basis 2,440
Increase in accrued payables for operating expenses 820
Decrease in prepaid operating expenses 780
Property, plant, and equipment, January 1, 20x2 3,600
Property, plant, and equipment, December 31, 20x2 5,400
Additional information:
a. There were no write-offs of accounts receivable during the year.
b. Equipment with an accumulated depreciation of ₱400 was sold during the year for ₱240 resulting to a gain
on sale of ₱30.
Requirements: Compute for the following:
(a) cash receipts from customers,
(b) cash payments to suppliers,
(c) cash payments for operating expenses, and
(d) cash payments for acquisition of property, plant, and equipment.
This document is the property of PHINMA EDUCATION
ACC 109: Intermediate Accounting 4
Modules #23 & 24 Student Activity Sheet
Name: _________________________________________________________________ Class number: _______
Section: ____________ Schedule: ________________________________________ Date: ________________
3. DERISION OBJECT OF RIDICULE Co. has the following information as of December 31, 20x2:
Jan. 1 Dec. 31
Accounts receivable 8,000 10,000
Allowance for bad debts (200) (500)
Prepaid rent 1,920 1,600
Accounts payable 3,400 4,400
DERISION reported profit of ₱4,400 for the year, after depreciation expense of ₱100, gain on sale of
equipment of ₱120, and restructuring and other provisions of ₱200. None of the provisions recognized during
the period affected cash.
Requirement: Compute for the cash flow from operating activities using the indirect method.
This document is the property of PHINMA EDUCATION
ACC 109: Intermediate Accounting 4
Modules #23 & 24 Student Activity Sheet
Name: _________________________________________________________________ Class number: _______
Section: ____________ Schedule: ________________________________________ Date: ________________
4. RAVAIL HARD LABOR Co. had the following information for 20x2:
a. Acquired 3-month treasury bills for ₱100,000.
b. Acquired equipment with a purchase price of ₱2,000,000 by paying 20% in cash and issuing a note
payable for the balance. There were no payments made on the note during the year.
c. Acquired land with fair value of ₱1,600,000 by issuing shares with aggregate par value of ₱1,200,000.
The excess is credited to share premium.
d. Extended a ₱800,000 loan to a director.
e. Borrowed ₱640,000 from a bank. Used the cash proceeds as follows: ₱400,000 for additional working
capital and ₱240,000 to settle scrip dividends declared in 20x1.
f. Settled an outstanding note payable by issuing shares with aggregate par value of ₱400,000. Share
premium resulted from the transaction amounted to ₱140,000.
Requirements: Compute for the net cash flows from (used in) (a) investing activities and (b) financing activities.
C. LESSON WRAP-UP
Thinking about Learning
What are your challenges in learning the concepts in this module? If you do not have challenges, what is your
best learning for today?
________________________________________________________________________________________
________________________________________________________________________________________
This document is the property of PHINMA EDUCATION
ACC 109: Intermediate Accounting 4
Modules #23 & 24 Student Activity Sheet
Name: _________________________________________________________________ Class number: _______
Section: ____________ Schedule: ________________________________________ Date: ________________
What are the questions/thoughts you want to share to your teacher today?
________________________________________________________________________________________
________________________________________________________________________________________
Answer Key
Skill-Building
1. FALSE 6. FALSE
2. TRUE 7. FALSE
3. TRUE 8. FALSE
4. TRUE 9. TRUE
5. FALSE 10. FALSE
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