Name: Maria Teresa O.

Aparre Teaching Date: September 26-30, 2022

Subject: Fundamentals of Accounting 2 Grade Level: Grade 12 Camellia
Method: Detailed Lesson Plan

I. OBJECTIVES: At the end of the lesson 80% of the students should be able to:

a. Discuss the components and structures of a Cash Flow Statement.

ABM_FABM12-If10

b. Value the importance of Cash flow statement in operating a business.

c. Prepare a Cash Flow Statement. ABM_FABM12-If11

II. SUBJECT MATTER

Topic: Cash Flow Statement

Reference:

Textbook: Fundamentals of Accountancy, Business and Management 2 Text

Manual

Fundamentals of Accountancy, Business and Management 2 Made

Easy by Win Ballada

Materials, Equipment and Resources:

 Textbook
 Multimedia Presentation
 Chalk
 Calculator
III. PROCEDURE

Teacher’s Activity Students Activity

A. Preliminary Activities

 Prayer
 Greetings
 Checking of Attendance

B. Review

Okay class, in our previous lesson, we

learned so much about cash which is an
important element of Statement of
Financial Position, it’s relationship to
income and revenue and so with the
Statement of Changes in Equity. It is a statement that present/shows all
As a review, who can still remember changes to the owner’s capitalization
what is statement in changes in equity? whether increase or decreases due the
reported date, ma’am
Okay very good! So, this morning we
are going to discuss the nature of cash as
it plays a pivotal role in the preparation of
Cash Flow Statement. But before that, let’s
begin our new lesson with an activity.

C. Motivation

This activity is entitled “Let’s compute

your Daily Allowance and Expense!

In this activity, you are going to list

down your Monthly Cash Allowance from
your parents (this should be computed on
a daily basis to be multiplied by the
number of days in a month.) Write down
also your liabilities from your classmates
and friends including your daily expenses
for food, transportation and all other
Students Activity
expenses from your allowance.

Teacher’s Activity
Deduct your monthly liabilities and
expenses from your allowance. Get the
difference and share it with your
classmates. Whatever amount derived at,
represents your daily allowance and
expense. Your allowance represents
“sources of funds” while your expenses
and debts represent “uses of funds”.
Combining all together in a T-account
format this is what your activity should be
looked like.

Monthly Allowance and Expenses

Cash Inflow Cash Outflow

(Sources) (Uses)
Allowance for the Liabilites and
month computed Expenses for the
by (Daily Month (Daily
Allowance Expenses
multiplied by multiplied by the
Number of days in Number of days in
A month) A month plus your
Liabilities

Before we proceed with our main topic, I

have here processing questions for you to
answer.

1. How much amount you raised from your

daily allowance and from your daily
expenses?
2. As a point of reference with our previous
lessons, what does your allowance and
expense represent?
3. What significant amount you came
across after deducting expenses from your
allowance? Can you explain the
Importance of this figure to you as an ABM
student?

D. Discussion
 Cash is the first line item in the balance
sheet under current asset classification. It
is readily available to finance the current
business operations. It has a normal
DEBIT balance. The illustrations below are
common cash transactions that would
affect its value to increase (sources) or
decrease (uses) under normal business
operation.
Cash Flow Statement provides an
analysis of inflows and/or outflows of cash
from/to operating, investing and financing
activities (Deloitte Global Services
Limited, 2015). This statement shows cash
transactions only as compared to SCI
which follows the accrual principle.

CASH
CASH INFLOWS CASH OUTFLOWS
(Sources of Funds) (Uses of Funds)
1. cash receipts from 1. cash paid for
owners acquisition of Plant
equipment
2. cash receipts from 2. cash paid to
bank loan suppliers
3. cash receipts from 3. cash paid for bank
sale of company assets loans
4. cash receipts from 4. cash paid for
collection of owner’s personal
customers accounts drawing
5. cash receipts from 5. cash paid for
sale of goods and shareholder’s
services dividends
6. cash receipts from 6. cash paid for
royalties, fees, salaries and other
commision and other operating expenses
revenues

The CFS provides the net change in

the cash balance of a company for a
period. This helps owners see if their
revenues are actually translated to cash
collections or if they have enough cash
inflows in order to pay any maturing
liabilities.
 The two approaches to preparing
Cash Flow Statement are:

1. Direct – The operating cash flow section

of the CFS under the direct method will
show each major class of gross cash
receipts and gross cash payments
(Deloitte Global Services Limited, 2015).

2. Indirect – The operating cash flow

section of the CFS under the indirect
method will reconcile with the net
income/loss of the company with the total
cash flows generated/used in operating
activities by adjusting the net income/loss
for effects of non-cash transactions.
Both approaches will yield the same
amount of cash flows from Operating
activities. Investing and Financing sections
of the CFS will yield the same results
under both approach.

The five major different parts of Cash

Flow Statement are;

1. Operating Activities – Activities that are

directly related to the main revenue
producing activities of the company such
as cash from customers and cash paid to
suppliers/employees.
2. Investing Activities – Cash transactions
related to purchase or sale of noncurrent
assets.
3.Financing Activities – Cash
transactions related to changes in equity
and borrowings. Net change in cash or net
cash flow (increase/decrease) – The net
amount of change in cash whether it is an
increase or decrease for the current
period. The total change brought by
operating, investing and financing
activities.
4. Beginning Cash Balance – The
balance of the cash account at the
beginning of the accounting period.
 5. Ending Cash Balance – The balance of
the cash account at the end of the
accounting period computed using the
beginning balance plus the net change in
cash for the current period.

Below is an illustration of Direct

Method of preparing Cash Flow
Statement

Example: DIRECT APPROACH

COVEY FUN LEARNING COMPANY

CASH FLOW STATEMENT FOR THE
YEAR ENDED DECEMBER 31, 2019

Cash Flow from Amount

Operating
Activities:
Receipts from Php1,000,000.00
Customers
Payments to (700,000.00)
Suppliers and
Employees
A.) Net Cash Php 300,000.00
Generated by
Operating
Activities
Cash flow from
Investing
Activities
Purchases of (Php150,000.00)
Property and
Equipment
B.) Net Cash used Php (150,000.00)
In Investing
Activities
Cash flow from
Financing
Activities
Long term loan Php300,000.00
From a bank
Withdrawals by ( 80,000.00)
Owner
Additional 100,000.00
Investment from
The owner
c.) Net Cash Php320,000.00
from Financing
Activities
Net Increase in
Cash and cash
Equivalents
(a+b+c) Php 470,000.00
Cash, January 1, Php 100,000.00
2019
Cash, December Php 570,000.00
31, 2019

EXAMPLE: INDIRECT APPROACH

COVEY FUN LEARNING COMPANY CASH FLOW

STATEMENT FOR THE YEAR ENDED DECEMBER 31,
2019

Cash flows from Amount

Operating
Activities:
Net Income P 250,000.00
Add back: 20,000.00
Depreciation
Loss on sale of 10,000.00
property and
equipment
Total 280,000.00
(Increase)/Decrease in (40,000.00 )
Trade and Other
Receivables – Net
Increase/(Decrease) in 60,000.00
Trade and Other
Payables
A) Net Cash generated P 300,000.00
by Operating Activities
Cash flows from
Investing Activities
Purchases of Property (P 150,000).00
 and Equipment
Proceeds from sale 30,000.00
B) Net Cash used in (P 120,000.00 )
Investing Activities
Cash flows from
Financing Activities
Long term loan from a P300,000.00
bank
Additional investment 100,000.00
from owner
Withdrawals by owner ( 80,000.00)
C) Net Cash Generated (P 320,000.00)
from Financing
Activities
Net increase in cash P 500,000.00
and cash equivalents
(A +B +C)
Cash, January 1, 2019 100,000.00
Cash, December 31, P600,000.00
2019

Under Indirect approach, the operating

activity starts with Net Income and it will be
adjusted with its non-cash items such as
depreciation. Any gain or loss accounts i.e.
Loss on sale of equipment as the case
maybe and other adjustments of account
under accrual concept of income and
expense recognition shall also be adjusted
against net income. Take note that
whatever approach you are using you will
still arrive at the same answer in both
approaches.

TIPS TO SOLVING CASH FLOW –

INDIRECT APPROACH

1. First part is operating activities

• Non-cash expenses are added back
while non-cash revenues are deducted.
Gain/loss on sale of non-current assets
are deducted/added back because the
cash transaction is recorded under
investing activities.
• Changes in current assets and current
liabilities are either added or deducted
Depending on whether they increased or
decreased during the year.
• Accounts Receivable – increases
revenue which increases net income but is
not a cash transaction
• Prepaid Expense – decreases cash but
does not change the net income
• Decrease in current assets – added to
net income
• Accounts Receivable – increases cash
but does not change the net income
• Prepaid Expense – increases expenses
which decreases net income but is not a
cash transaction Decrease in current
assets added to net income Increase in
current liabilities added to net income.
• Accounts Payable – increases expenses
which decreases net income but is not a
cash transaction
• Unearned Income – increases cash but
does not change the net income Decrease
in current liabilities deducted to net income
• Accounts Payable – decreases cash but
does not change the net income
• Unearned Income – increases revenue
which increases net income but is not a
cash transaction

2. Second part is investing activities

3. Third part is financing activities

Important Formula to REMEMBER-

Indirect Approach

A. Receipts from customers – is derived

from the following formula:

Ending Accounts Receivable = Beginning

Accounts Receivable + Net Sales –
Collections

Therefore: Collections (receipts from

customers) = Beginning Accounts
Receivable + Net Sales or Net Revenue –
Ending
 B. Payments to Suppliers and Employees
– derived from the following formula:

Ending Accounts Payable and Ending

Accrued Salaries Expense = Beginning
Accounts Payable + Beginning Accrued
Salaries Expense + Net Purchases +
Salaries Expense – Payments

Therefore: Payments = Beginning

Accounts Payable + Beginning Accrued
Salaries Expense + Net Purchases +
Salaries Expense – Payments

E. Generalization

Now, let’s remember that Cash Flow Statement provides the net change in cash
balance of a company for a given period. It presents an analysis of inflows and/or
outflows of cash from/to operating, investing and financing activities. This statement
shows cash transactions only as compared to SCI which follows the accrual principle.

F. Application

Now, let us apply what we know:

Direction: Given the data below, you are to prepare a Cash Flow Statement of
Covey19 Corporation highlighting its operating, investing and financing activities. You
prove that Covey 19 Corp cash balance is being reconciled with its cash balance at the
end of the period.

Covey 19 Corporation The cash account of Covey 19 has a beginning balance of

P129,937.50. Its yearend balance stands at P254,925. The table below show the
summarized transactions from the account of Covey19 Company.

Cash from customer P 725,175.00

Payments to suppliers 300,547.50
Payments for other operating expenses 58,850.00
Salaries paid 19,992.50
Purchase of Equipment 253,000.00
Sale of delivery Equipment 6,875.00
Proceeds from sale of computer 42,762.50
equipment
Withdrawals of owners 229,350.00
Proceeds from bank loan 82,500.00
Contribution of owners 137,500.00
Interest paid 8,085.00

G. Evaluation

Direction: Shown below is the general ledger of cash account broken down as follows;
Prepare a Statement of Cash Flows for the year ended. Cash Balance beginning
January 1, 2018 is P60,0000. Use a separate worksheet for your answer.

Cash Debits (Sources) Amount

Investment by owner P 200,000.00
Cash received from service rendered 100,000.00
Proceeds from bank loan 150,000.00
Collection from customers account 75,000.00
Proceeds from sale of an old truck 65,000.00
P 590,000.00
Cash Credits (Uses)
Payment of rental P 80,000.00
Purchase of new equipment 125,000.00
Payment of utilities expenses 110,000.00
Withdrawal by owner 50,000.00
Payment of taxes and license 12,000.00
P 377,000.00

H. Assignment
Direction: Determine the net cash flow from operating, investing and financing activities
for the year ended December 31, 2019 The differences in Bell Company’s statement of
financial position on December 31, 2019 and 2018 are:
Cash and cash equivalents P 270,000
Short term investments 200,000
Accounts Receivable, net of allowance ( 20,000 )
Inventory 100,000
Noncurrent investments ( 100,000 )
Property Plant and equipment 700,000
Accumulated Depreciation ( 50,000)
1,100,000
Accounts payable ( 5,000)
Dividends payable 160,000
Short term debt 300,000
Long term debt 130,000
Share capital, P10 par 150,000
Share premium 75,000
Retained earnings 290,000
1,100,000

Additional information relating to 2019;

1. Net income was P790,000
2. Cash dividends of P500,000 were declared
3. Equipment costing P600,000 and having a carrying amount of P350,000 was sold for
P350,000
4. A non-current investment was sold for P90,000.

Prepared by: Checked by:

Maria Teresa O. Aparre Ludabella Aurora C. Sanes,Ph.D.JD

Fundamentals of Accounting 2 Teacher, T2-SHS MT-II

Noted by:

Juliet S. Lapiz

SSP II