Cash Flow Statement

Learner's Module in Fundamentals of

Accountancy and Business Management 2
Quarter 1 ● Module 5

DENVER G. ALIWANA
Developer

Department of Education • Cordillera Administrative Region

NAME:____________________________ GRADE AND SECTION: ____________

TEACHER: ________________________ SCORE: ________________________
Republic of the Philippines
DEPARTMENT OF EDUCATION
Cordillera Administrative Region
SCHOOLS DIVISION OF BAGUIO CITY
Military Cut-off, Baguio City

Published by
Learning Resource Management and Development System

COPYRIGHT NOTICE
2020

Section 9 of Presidential Decree No. 49 provides:

“No copyright shall subsist in any work of the Government of the Philippines.
However, prior approval of the government agency of office wherein the work is
created shall be necessary for exploitation of such work for profit.”

This material has been developed for the implementation of K-12 Curriculum
through the DepEd Schools Division of Baguio City – Curriculum Implementation
Division (CID). It can be reproduced for educational purposes and the source must be
acknowledged. Derivatives of the work including creating an edited version, an
enhancement or a supplementary work are permitted provided all original work is
acknowledged and the copyright is attributed. No work may be derived from this
material for commercial purposes and profit.

ii
PREFACE

This module is a project of the DepEd Schools Division of Baguio City through
the Curriculum Implementation Division (CID) which is in response to the
implementation of the K to 12 Curriculum.

This Learning Material is a property of the Department of Education, Schools

Division of Baguio City. It aims to improve students’ academic performance specifically
in Accountancy and Business Management.

Date of Development : August 2020

Resource Location : DepEd Schools Division of Baguio City
Learning Area : ABM
Grade Level : 12
Learning Resource Type : Module
Language : English
Quarter/Week : Q1/W5
Learning Competency/Code : discuss the components and structures of a CFS
(ABM_FABM12-If-10)
: prepare a CFS (ABM_FABM12-If-11)

iii
ACKNOWLEDGEMENT

The developer would like to express his deep and sincere gratitude to those
who contributed significantly in the development of this learning material.

The developer is grateful to the following individuals for the motivation as well
as the moral and technical support in the crafting of this module: our assistant school
head in the Senior High department, Janet B. Pascua and our school’s supervisory
office led by our school principal, Madam Brenda M. Cariño.

To my colleagues in the ABM group of Baguio City National High School,

Baguio City National Science High School, Guisad Valley National High School,
Eastern La Trinidad National High School for the fruitful collaboration and for sharing
their knowledge and expertise as I develop this learning resource.

Development Team
Author/s: Denver G. Aliwana
Illustrator: Marilyn Degay-Bugatti (Label Icons)

School Learning Resources Management Committee

Brenda M. Cariño School Principal
Editha L. Laop Subject/ Learning Area Specialist
Sherwin L. Fernando School LR Coordinator

Quality Assurance Team

Francisco C. Copsiyan EPS – Mathematics
Niño M. Tibangay PSDS – District III

Learning Resource Management Section Staff

Loida C. Mangangey EPS – LRMDS
Victor A. Fernandez Education Program Specialist II - LRMDS
Christopher David G. Oliva Project Development Officer II – LRMDS
Priscilla A. Dis-iw Librarian II
Lily B. Mabalot Librarian I

CONSULTANTS

JULIET C. SANNAD, EdD

Chief Education Supervisor – CID

CHRISTOPHER C. BENIGNO
Asst. Schools Division Superintendent

MARIE CAROLYN B. VERANO, CESO V

Schools Division Superintendent

iv
TABLE OF CONTENTS

COPYRIGHT NOTICE ................................................................................................ii

PREFACE .................................................................................................................. iii
ACKNOWLEDGEMENT .............................................................................................iv
TABLE OF CONTENTS ............................................................................................. v
What I Need to Know ................................................................................................. 1
What I Know ............................................................................................................... 2
Lesson: Cash Flow Statement ................................................................................... 5
What’s In .................................................................................................................... 5
What’s New ................................................................................................................ 6
Activity: My Personal Cash Flow? ....................................................................... 6
What Is It .................................................................................................................... 8
What’s More ............................................................................................................. 12
Activity 1: Whose side?...................................................................................... 12
Assessment 1: ................................................................................................... 12
Activity 2: From Ledger to CFS .......................................................................... 13
Assessment 2: ................................................................................................... 14
What I Have Learned ............................................................................................... 14
What I Can Do .......................................................................................................... 15
Activity 1: Preparing CFS from Special Journals ............................................... 15
Activity 2: Improving Cash Flows ....................................................................... 16
Assessment.............................................................................................................. 17
Additional Activity ..................................................................................................... 20
Activity: Money Motto......................................................................................... 20
ANSWER KEY ......................................................................................................... 21
REFERENCES ......................................................................................................... 23

v
What I Need to Know

Hello learner! This module was designed and written with you in mind. This
module is designed to guide you towards your mastery of completing the accounting
cycle particularly on the preparation another financial report, the Cash Flow Statement
(CFS).
While going through this module, you are expected to:
1) explain the purpose of CFS;
2) discuss the components of a CFS - operating, investing and financing activities;
3) prepare a CFS.
By the way, always remember to use a separate sheet of paper for you to write
your answers on the different activities presented in this learning module. DO NOT
ANSWER here directly.
Now, here is an outline of the different parts of your learning module. The
descriptions will guide you on what to expect on each part of the module.

Icon Label Description

This states the learning objectives that you need
What I need to know
to achieve as you study this module.

This is to check what you already know about the

What I know
lesson on this module. If you answered all the
questions here correctly, then you may skip
studying this module.
This connects the current lesson with a topic or
What’s In
concept necessary to your understanding.

This introduces the lesson to be tackled through

What’s New
an activity.

This contains a brief discussion of the learning

What Is it
module lesson. Think of it as the lecture section
of the lesson.
These are activities to check your understanding
What’s More
and to apply what you have learned from the
lesson.
This generalizes the essential ideas tackled from
What I have Learned
this module.
This is a real-life application of what you have
What I Can Do
learned.

This is an evaluation of what you have learned

Post-Assessment
from this learning material.

Additional Activity This is an activity that will strengthen and fortify

your knowledge about the lesson.

1
What I Know
PRE-TEST: If you answer all the test items correctly in this pretest, then you may
skip studying this learning material and proceed to the next learning module.

MULTIPLE-CHOICE.
Direction: Choose the letter of the correct answer. Write your answers on the spaces
provided before each number. You may need your calculators in this part.

_____ 1. The CFS is a financial report that provides information on the

___________ of a business entity.
A. Liquidity
B. Profitability
C. Solvency
D. Stability
_____ 2. What special journal shows the cash inflows?
A. Cash Disbursement Journal
B. Cash Receipt Journal
C. Purchase Journal
D. Sales Journal
_____ 3. What are the two ways of financing a business?
_ A. Debt and Equity
_ B. Direct and Indirect
C. Investment and Withdrawal
D. Trade and Non-Trade
_____ 4. What is the effect of a negative net cash flow to the ending balance of
cash compared to beginning balance?
A. Ending balance is greater than beginning balance
B. Ending balance is lesser than beginning balance
C. Ending balance is the same as the beginning balance
D. Effect cannot be determined
_____ 5. A business entity acquires stocks of a corporation for purposes of
trading when the price goes up. What activity relates to the acquisition
of stocks?
A. Acquiring
B. Financing
C. Investing
D. Operating
_____ 6. What activity pertains to the purchase of equipment on account?
A. Financing
B. Investing
C. Operating
D. Not a cash-related transaction

2
_____ 7. Which of these is a cash inflow related to investing activity?
A. Acquisition of inventories
B. Depreciation of fixed assets
C. Disposal of fixed asset
D. Loss on writing off receivables
_____ 8. What are the two activities that are similar in presentation under the
_ two methods of presenting the CFS?
_ A. Financing and operating
B. Operating and investing
C. Investing and financing
D. Non-operating and operating
_____ 9. What accounts are affected by operating activities?
A. Balance sheet accounts
B. Income statement accounts
C. Long-term accounts
D. Owner’s Equity accounts
_____ 10. What is considered the most-liquid asset?
A. Cash
B. Intangibles
C. Payables
D. Receivables
_____ 11. The net cash flow from operating activities is P300,000; investing
activities is P (50,000); and financing activities is P 100,000. How much
is the net increase in cash?
A. P 300,000
B. P 350,000
C. P 400,000
D. P 450,000
_____ 12. The cash ledger has a beginning balance of P 60,000. Based on the
CFS, there is a net decrease of P20,000. How much is the ending
balance of cash?
A. P 40,000
B. P 60,000
C. P 80,000
D. P 100,000
_____ 13. The net increase in cash is P50,000. How much is the ending balance
_ if the beginning balance is P75,000?
_ A. P 25,000
B. P 50,000
C. P 75,000
D. P 125,000

3
_____ 14. What are the two methods of presenting the CFS?
A. Current and non-current
B. Direct and indirect
C. Inflow and outflow
D. Short and long term
_____ 15. The total cash inflow from operating activities is P50,000 while the total
cash outflow is P70,000; on the other hand, the total cash outflow from
investing activities is P 30,000 while there are no cash inflows; and
financing activities reported a cash inflow of P40,000 with no cash
outflow. How much is the net increase/ decrease in cash ?
A. 5,000
B. (5,000)
C. 10,000
D. (10,000)

4
Lesson: Cash Flow Statement

What’s In
By this time, it is expected that you can demonstrate mastery in the preparation
of the first three types of financial reports learned in the previous modules – the
Statement of Financial Position (SFP), the Statement of Comprehensive Income (SCI)
and the Statement of Changes in Equity (SCE).

In this module, you will learn how to prepare the fourth component which is the
Cash Flow Statement (CFS) of Statement of Cash Flows (SCF). As the name
suggests, CFS will be dealing with cash and its related transactions.

Recall in the previous lessons in Fundamentals of Accountancy and Business

Management 1 (FABM 1) the journal entries you have been making in recording
various transactions. Have you noticed what account title is involved most of the time?
It’s cash either in the form of cash on hand, cash in bank, petty cash fund or cash
equivalents. With these numerous transactions comes two special journals dedicated
in simplifying and facilitating the recording of recurring transactions. Can you still recall
these special journals? The Cash Receipt Journal and the Cash Disbursement
Journal. These will be useful in learning the CSF.

5
What’s New

Activity: My Personal Cash Flow?

Directions: Invite your family or household members into a short group discussion.
Recall your family’s cash sources and your spending patterns in the pre-COVID
months (October 2019 – February 2020) and during the COVID months (March – July
2020). Record your discussions on the given templates – Table 1 and Table 2. Answer
the questions at the end of the activity. Write your answers on the spaces provided.

Sources of cash may include income from employment, income from business,
donations and borrowings from any person or entity. Consolidate related items in one
line item for brevity. For instance, the total income from employment for five months
should be one line item only.
Uses of cash may include payment for household expenses like rent and
electric bills or purchase of essentials like food. Consolidate also related items in one
line item for brevity. For instance, the total of all monthly payments of electric bills
should be presented as one line item only.
An example is presented to guide you in this activity.

Table 1: Sources and Uses of Cash in the pre-COVID period

SOURCES USES
Sourced from: Amount Used for: Amount
Ex. Income from 100,000 Ex. Daily allowance of 15,000
employment children to school

Total Total

6
Table 2: Sources and Uses of Cash during the COVID period
SOURCES USES
Sourced from: Amount Used for: Amount
Ex. Income from selling 65,000 Ex. Payment for rental 12,000
food products fee (June and July only)

Total Total

Compare Table 1 with Table 2 then answer the questions that follow. How does your
total sources of cash during the COVID period compared with the pre-COVID period?
(increased, decreased, no change) _____________

1. How does your total cash used during the COVID period compared with the
pre-COVID period? (increased, decreased, no change) ________________
2. What are the causes of increase or decrease in the sources of cash?
____________________________________________________________
3. What are the causes of increase or decrease in the uses of cash?
____________________________________________________________

7
What Is It
Cash Flow Statement (CFS)

The CFS is a financial report that details the cash inflows (sources of cash) and
cash outflows (uses of cash). Cash is the most used asset of a business. Almost every
transaction involves cash. In fact, there is a maxim in finance that says “Cash is the
King’ to describe the importance of cash in maintaining operational efficiency.
The CFS provides an insight on the liquidity of a business entity. Liquidity
refers to the availability of cash and other short-term assets to pay current or short-
term obligations. Cash is most liquid asset.
Cash inflows are the cash receipts. The Cash Receipt Journal (CRJ)
documents these inflows. In the absence of the CRJ, the debit side of the cash ledger
also corresponds to the inflows.
Cash outflows, on the other hand are the cash disbursements. The Cash
Disbursement Journal (CDJ) or Cash Payment Journal (CPJ) documents these
outflows. In the absence of CDJ or CPJ, the credit side of the cash ledger also
sorresponds to the outflows.
Various users will be interested in the CFS of an entity so they can make
informed decisions. Creditors like banks and lending institutions want to know if the
business has sufficient cash inflows to meet obligations as they fall due. Employees,
too, maybe interested as this concerns their regular salary payments. Internally,
management will use the CFS in crafting plans, policies and strategies to improve the
business.

Cash Flow Activities

There are three classifications of cash flow activities – Operating, Investing and
Financing. These are also the referred to as the sections, components or parts of the
CFS. A summary of the three activities are illustrated below:

 Principal revenue-generating activities

OPERATING
of the firm
ACTIVITIES
 Payment of expenses

 Acquisition and disposal of fixed-

INVESTING assets or long-term assets.
ACTIVITIES  Investments except cash equivalents

FINANCING  Changes in the owner’s equity

ACTIVITIES  Acquisition and settlement of loans

8
1. Operating Activities
Cash flows from operating activities involves transactions affecting the
income and expenses. They relate to the day-to-day operations of the business.
Here are some examples:

Inflow Outflow
a. Cash receipts from the rendering a. Cash payments for expenses
of services or sale of goods b. Cash payments for purchase of
b. Cash receipts from interest inventory
income c. Cash payment for trade payables
c. Cash receipts from dividend
income
d. Cash receipts from collection of
trade receivables

2. Investing Activities
Cash flow from investing activities involves transactions relating to the
acquisition and disposal of long-term assets and investments such as Fixed
Assets or Property, Plant and Equipment (PPE). Here are some examples:

Inflow Outflow
a. Cash receipts from the sale of a. Cash payments for acquisition of
PPE (e.g. land, building, PPE
equipment) b. Cash payments for purchase of
b. Cash receipts from sale of stock stock investment
investment c. Cash payments for purchase of
c. Cash proceeds from investment bond investment
in bonds

3. Financing Activities
There are two ways of financing or providing capital for a business:
equity and debt financing. Cash flow from financing activities involves
transactions relating to the owner’s cash investment and drawings (equity
financing) and business borrowings from various sources (debt financing).
Here are some examples:

Inflow Outflow
a. Cash receipts from owner’s cash a. Cash payments on owner’s
investment personal drawings/ withdrawals
b. Cash proceeds from loans b. Cash payments on settlement of
loans
Note:
Interest income results from interest-bearing notes receivable or from
investments in debt instruments (e.g. bonds) while dividend income is from
investment in stocks. The acquisition of stocks and bonds are investing
activities. Meanwhile, interest expense is an offshoot of loans or borrowings
which is a financing activity.
Although interests and dividends are products of investing or financing
activities, they are reported as part of operating activities because they are
presented in the entity’s Income Statement or SCI.

9
CFS Format

Study the format of a CFS taking note of the similarities or differences from the
other financial statements you have learned in the previous lessons.

(Heading)

Cash Flows from Operating Activities

Cash inflows from operating ctivities xxxx
Cash outflows from operating activities (xxx)
Net Cash Flow from operating activities xxxx

Cash Flows from Investing Activities

Cash inflows from investing ctivities xxxx
Cash outflows from investing activities (xxx)
Net Cash Flow from investing activities xxxx

Cash Flows from Financing Activities

Cash inflows from financing ctivities xxxx
Cash outflows from financing activities (xxx)
Net Cash Flow from financing activities xxxx

Net increase (decrease) in cash xxxx

Add: Cash, beginning balance xxx
Cash, ending balance xxxx

Just like the other financial reports, the CFS must have a heading. The first line
contains the name of the business, the second line is the title of the report, in this case
Cash Flow Statement. The third line starts with the phrase “For the year ended”
followed by the date when the year or the period ends. The year may be replaced with
month, quarter or semi-annual period when making interim reports or periods that are
less than one year.
Notice how the three sections are distinctly presented. For each section, the
cash inflows are presented first followed by the outflows. Notice also that cash outflows
are presented as negative numbers (enclosed in parentheses). This is because, you
are supposed to deduct the outflows from the inflows. The result could be a positive
or a negative cash flow.
The net cash flow from each activity are then added to determine the net
increase or decrease in cash. A positive net cash flow means that there is an increase
in cash while a negative cash flow means otherwise.
For the last step, you now add or deduct the net increase or decrease to or from
the beginning balance of cash to determine the ending balance.
You must take note that the ending balance must be the same with the ledger
balance of cash.
Good accounting practice also suggests that a single line (single-ruling) is
drawn to signify that a mathematical operation has been performed and the final

10
amount is double-ruled. Can you locate the single-rulings and double-ruling from the
sample CFS?

Direct versus Indirect Method

There are two methods of preparing the CFS – direct method and indirect
method. Only the Operating Activities section differs in presentation with the two
methods. The investing and financing activities section are the same for both methods.
The direct method utilizes the actual transactions involving cash. On the other
hand, the indirect method uses the changes in the beginning and ending balances of
current asset and current liability accounts to determine the changes in cash. The
volume of cash-related activities determines which method is to be used. Often, small
businesses use the direct method while the larger ones use the indirect method.
In this module, you will be learning only the direct method. The indirect method
will be learned in higher accounting subjects.

Sample CFS using the Direct Method

Aliwana Travel and Tours

Cash Flow Statement
For the year ended December 31, 2019

Cash Flows from Operating Activities

Cash receipts from sale of goods 500,000
Cash receipts from collection of trade receivables 80,000
Cash receipts from interest income earned 10,000
Cash paid for purchase of inventories (220,000)
Cash paid for salaries expense (30,000)
Cash paid for rent expense (25,000)
Cash paid for delivery expense (5,000)
Net Cash Flow from operating activities 310,000

Cash Flows from Investing Activities

Cash receipt from sale of old equipment 20,000
Cash paid for acquisition of equipment (300,000)
Net Cash Flow from investing activities (280,000)

Cash Flows from Financing Activities

Cash proceeds from bank loan 100,000
Cash receipt from owner’s investment 50,000
Cash withdrawal by the owner (20,000)
Net Cash Flow from financing activities 130,000

Net increase (decrease) in cash 160,000

Add: Cash, beginning balance 70,000
Cash, ending balance 230,000

11
Congratulations for going this far. I believe you are now ready to enhance your
understanding of the lesson by doing the succeeding activities.

What’s More
Activity 1: Whose side?

Directions:
This activity will connect your knowledge of Journalizing to CFS preparation.
Journalizing requires you to determine the accounts to be debited and credited.
Study the given cash transactions. For each transaction, identify which side of
the cash ledger will the amount be posted by forwarding the amount to the proper
column – Debit or Credit. After answering all 10 items, compute for the total of the
debit and credit columns. An example is provided as your guide

Transaction Amount Debit Credit

Ex. Collection of amount owed by a customer 1,000 1,000
1. Payment to Baguio Midland Courier for
2,000
newspaper advertisements
2. Purchase of inventory for cash 50,000
3. Owner’s cash investment 75,000
4. Payment to BENECO for electricity 3,000
5. Receipt of cash proceeds from bank loans 100,000
6. Purchase of machineries 25,000
7. Payment of advance rent for three months 30,000
8. Owner’s cash drawing 10,000
9. Receipt of cash for services rendered 15,000
10. Sale of a used laptop 5,000
Totals (11) (12)

Assessment 1:
Directions: Answer the following questions. Some questions may require you to do
some solving. Writer your answers on the spaces provided.

1. How much is the total cash inflows? ________________

2. How much is the total cash outflows? _________________
3. Is there a net increase or net decrease in cash? _______________
4. How much is the net increase or net decrease? ____________________
5. If the beginning cash balance is P 500,000, how much is the ending balance?
____________________

Good job! You may now proceed to the next activity.

12
Activity 2: From Ledger to CFS

Directions:
This activity will connect now your previous knowledge of posting journal entries
to the ledger with the preparation of CFS. Can you still recall the process of posting?
So please take time to study the ledger for Cash. You may want to bring out a
calculator to verify the totals of the debit and credit columns as well as the balance.
Classify the transactions as to which activity they belong – Operating, Investing
or Financing. Write your answers on the spaces provided for each activity. Remember
to write the amount of outflows enclosed in parentheses (e.g (10,000). The first entry
on the ledger has been done for you.

Account Title: CASH Account #: 1001

Transaction Dr. Cr.
Beginning balance 350,000
1. Payment of business fees and licenses 20,000
2. Receipt of cash for services rendered 15,000
3. Sale of depreciated office tables 5,000
4. Acquisition of new office tables 50,000
5. Purchase of bond papers and printer inks 7,000
6. Collection of receivables from customer A 12,000
7. Cash withdrawn for personal use 5,000
8. Payment of principal of interest-bearing notes 200,000
9. Payment of interest on notes payable 2,500
10. Owner’s additional investment 100,000
11. Receipt of cash for services rendered 78,000
12. Payment of salaries of employees 35,000
Totals 560,000 319,500
Balance 240,500

Classify the transactions here. Write only the transaction number and the amount.
Observe how transaction #1 was posted under operating activities.

A. Operating B. Investing Activities C. Financing

Activities Activities
# Amount # Amount # Amount
1 (20,000)

13
Assessment 2:

Directions: Answer the following questions. Some questions might require you to do
some solving. Writer your answers on the spaces provided.

1. How much is the net cash flow from operating activities? ________________
2. How much is the net cash flow from investing activities? _________________
3. How much is the net cash flow from financing activities? _________________
4. By comparing the beginning balance and ending balance of cash, how much is
the net increase or decrease? ____________________

Another kudos for your effort in finishing the second activity for this part!

What I Have Learned

Activity: Self-Assessment

Directions: Below are the statements related to the learning objectives of this module.
On a scale of 1 to 4 (4 as the highest), please rate your perception of your level of
ability in each area or skill. Use this rating guide.

Rating Description
1 Help, I honestly have little mastery of it
2 I just need more time and activity to master it
3 I am nearing mastery of it
4 I am confident that I have mastery of it

Objectives Rating
1. I can explain the purpose of a CFS
2. I can identify the cash transactions related to the operating
activities of a business entity.
3. I can identify the cash transactions related to the investing
activities of a business entity.
4. I can identify the cash transactions related to the financing
activities of a business entity.
5. I can distinguish cash inflows from cash outflows
6. I can solve for the net increase or decrease in cash
7. I can discuss the format of a CFS
8. I can prepare the CFS in good form

In case, you have rated yourself a 1 or 2 in any of the competencies, you may
want to go back to the ‘What is it’ part for some review of the lesson.

14
What I Can Do
Activity 1: Preparing CFS from Special Journals

Directions: Read the problem carefully taking notes of the important details needed
in the preparation of CFS. Prepare the CFS in good form using the template given.

Problem:
The owner of Chuck’s Carwash asked you to help him prepare the Cash Flow
Statement for the month of July 2020. He provided you with the Cash Receipt Journal
and Cash Disbursement Journal. The balance of cash on July 1, 2020 is P 180,000.

CASH RECEIPTS JOURNAL

Debit Credit
Account Title
Date Particulars Amount Amount
Credited
July 1Interest from bank Interest Income
1,200 1,200
deposits
5 Rendering of services 45,000 Carwash Revenue 45,000
10 Collection of trade Accounts
8,000 8,000
receivables Receivable
25 Cash investment 50,000 Chuck, Capital 50,000
28 Rendering of services 15,000 Carwash Revenue 15,000

CASH DISBURSEMENTS JOURNAL

Debit Credit
Account Title
Date Particulars Amount Amount
Debited
July 2 Purchase of carwash Machineries 20,000 20,000
machine
7 Payment for trade payables Accounts 9,000 9,000
Payable
8 Payment for loans Loans Payable 150,000 150,000
24 Payment for cleaning Supplies 5,000 5,000
supplies Expense
26 Rental payment for the Rent Expense 10,000 10,000
month

Note: The Cash Receipts Journal represents cash inflows while Cash Disbursements
Journal includes cash outflows.

15
Template for your CFS

Activity 2: Improving Cash Flows

Directions: Your neighborhood sari-sari store owner noticed that the balance of her
cash has been declining in the past months during the COVID period. She asked you
to help her diagnose the problem. Suggest a way for her to address the two problems
that you have identified. Explain your answers in no more than 4 simple sentences.

Problem 1: Accounts receivable (pautang) is increasing due to low collection rate.

Suggestion:
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________

16
Problem 2: Some non-essential and luxury inventories such as chocolates and
imported canned goods are slow-moving.
Suggestion:
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________

Your answer in each problem will be evaluated using this guide:

5 points – Suggestion is feasible and well-explained
4 points – Suggestion is feasible but with minor lacking details
3 points – Suggestion is good but may not be applicable to the given situation

Assessment
MULTIPLE-CHOICE.
Direction: Choose the letter of the correct answer. Write your answers on the spaces
provided before each number. You may need your calculators in this part.

_____ 1. What is considered the most-liquid asset?

A. Cash
B. Intangibles
C. Payables
D. Receivables
_____ 2. What are the two methods of presenting the CFS?
A. Current and non-current
B. Direct and indirect
C. Inflow and outflow
D. Short and long term
_____ 3. The CFS is a financial report that provides information on the
___________ of a business entity.
A. Liquidity
B. Profitability
C. Solvency
D. Stability
_____ 4. What special journal shows the cash inflows?
A. Cash Disbursement Journal
B. Cash Receipt Journal
C. Purchase Journal
D. Sales Journal
_____ 5. What are the two ways of financing a business?
_ A. Debt and Equity
_ B. Direct and Indirect
C. Investment and Withdrawal
D. Trade and Non-Trade

17
_____ 6. What is the effect of a negative net cash flow to the ending balance of
cash compared to beginning balance?
A. Ending balance is greater than beginning balance
B. Ending balance is lesser than beginning balance
C. Ending balance is the same as the beginning balance
D. Effect cannot be determined
_____ 7. A business entity acquires stocks of a corporation for purposes of
trading when the price goes up. What activity relates to the acquisition
of stocks?
A. Acquiring
B. Financing
C. Investing
D. Operating
_____ 8. What activity pertains to the purchase of equipment on account?
A. Financing
B. Investing
C. Operating
D. Not a cash-related transaction
_____ 9. Which of these is a cash inflow related to investing activity?
A. Acquisition of inventories
B. Depreciation of fixed assets
C. Disposal of fixed asset
D. Loss on writing off receivables
_____ 10. What are the two activities that are similar in presentation under the
_ two methods of presenting the CFS?
_ A. Financing and operating
B. Operating and investing
C. Investing and financing
D. Non-operating and operating
_____ 11. What accounts are affected by operating activities?
A. Balance sheet accounts
B. Income statement accounts
C. Long-term accounts
D. Owner’s Equity accounts
_____ 12. The net cash flow from operating activities is P300,000; investing
activities is P (50,000); and financing activities is P 100,000. How much
is the net increase in cash?
A. P 300,000
B. P 350,000
C. P 400,000
D. P 450,000
_____ 13. The cash ledger has a beginning balance of P 60,000. Based on the
CFS, there is a net decrease of P20,000. How much is the ending
balance of cash?
A. P 40,000
B. P 60,000
C. P 80,000
D. P 100,000

18
_____ 14. The net increase in cash is P50,000. How much is the ending balance
_ if the beginning balance is P75,000?
_ A. P 25,000
B. P 50,000
C. P 75,000
D. P 125,000
_____ 15. The total cash inflow from operating activities is P50,000 while the total
cash outflow is P70,000; on the other hand, the total cash outflow from
investing activities is P 30,000 while there are no cash inflows; and
financing activities reported a cash inflow of P40,000 with no cash
outflow. How much is the net increase/ decrease in cash ?
A. 5,000
B. (5,000)
C. 10,000
D. (10,000)

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Additional Activity
Activity: Money Motto

Directions: Read the following suggestions of Chinkee Tan on how to manage your
money. Chinkee Tan is a motivational speaker on personal finance. Choose one
suggestion and create an original motto, saying or quotation that you want to apply in
your daily life.

5 Money Tips from Chinkee Tan

1. Live to earn from multiple sources of income
“Never get your eggs from one basket. Having one source of income is never
enough. You need to generate income for the short-term, medium-term and long-
term”
“Your short-term income can be used to pay off your daily expenses such
as transportation and your meal allowance. Your medium-term can be used to pay
your monthly bills and expenses, like rent, electricity, groceries and others, while
your long-term can be an emergency fund or retirement fund.”
2. Live a lifestyle of simplicity
Never compare yourself with others. There are only two things that will
happen. It is either you get disappointed because others are better off than you, or
you will be proud because you are better off than others. At the end of the day, they
are both unhealthy.
Some people seem to fall into the trap of living the lifestyles of the rich and
famous. They keep on buying things that will make them feel good. The issue is not
what you want to buy, it is how much can you really afford. Choose to live in
simplicity for contentment is great gain.
3. Live to prioritize saving before spending
“The right money value which I inherited from my parents is to save first
before spend. They taught me the principle 50-25-25. For every peso I earn, 50
cents goes to savings, 25 cents goes to investment, and 25 cents goes to spending.
If I want to spend one peso, I have to earn four pesos so that two pesos go to
savings, one peso goes to investing and one peso for spending.”
What is important is that you prioritize your savings. Spend only after you’ve
allotted an amount for your savings. Save early, and save regularly.
4. Live to spend in cash and avoid getting into bad debts
Always spend in cash so that you can make sure that you don’t overspend
and go over your budget. Develop the habit of saving, not borrowing.
5. Live to learn and invest in financial education
There is a saying that if you think investment education is expensive, try
ignorance. You can graduate with honors from college and still become a financial
failure because you don’t have the right money skills to build.
https://financialadviser.ph/5-money-tips-from-chinkee-tan/

20
21 C. Operating Activity
7. (5,000)
8. (200,000)
10. 100,000
B. Investing Activity
3. 5,000
4. (50,000)
A. Operating Activity
1. (20,000)
2. 15,000
5. (7,000)
6. 12,000
9. (2,500)
11. 78,000
12. (35,000)
Activity 2: From Ledger to CFS
1. 195,000
2. 120,000
3. Net increase
4. 75,000
5. 575,000
Assessment 1:
1. Credit
2. Credit
3. Debit
4. Credit
5. Debit
6. Credit
7. Credit
8. Credit
9. Debit
10. Debit
11. 195,000
12. 120,000
Activity 1: Whose Side
What’s More
Answers may vary
What’s New
1. A
2. B
3. A
4. B
5. C
6. D
7. A
8. C
9. B
10. A
11. B
12. A
13. D
14. C
15. D
16.
Multiple-Choice
What I know
ANSWER KEY
22
1. A
2. B
3. A
4. B
5. A
6. B
7. C
8. D
9. C
10. C
11. B
12. B
13. A
14. D
15. D
16. D
Multiple-Choice
Assessment
Answers may vary.
Activity 2: Improving Cash Flows
Chucks’s Carwash
Cash Flow Statement
For the month ended July 31, 2020
Cash Flows from Operating Activities
Interest from bank deposits 1,200
Cash receipts from rendering services 60,000
Collection of receivables 8,000
Payment of trade payables (9,000)
Payment for supplies (5,000)
Payment for rentals (10,000)
Net Cash Flow from operating activities 45,200
Cash Flows from Investing Activities
Purchase of carwash machine (20,000)
Net Cash Flow from investing activities (20,000)
Cash Flows from Financing Activities
Cash receipt from owner’s investment 50,000
Payment of Loans (150,000)
Net Cash Flow from financing activities 100,000
Net increase (decrease) in cash 74,800
Add: Cash, beginning balance 180,000
Cash, ending balance 105,200
Activity 1: Preparing CFS from Special Journals
What I can do
1. 40,500
2. (45,000)
3. (105,000)
4. (109,500)
Assessment 2:
REFERENCES
Aliling, Leonardo E. Fundamentals of Basic Accounting. Quezon City: Rex Bookstore,
2013.
Ferrer, Rodiel C., and Zeus Vernon B. Millan. Fundamentals of Accountancy, Business
and Management Part 2. 2nd ed. Baguio City: Bandolin Enterprise, 2018.
Financial Accounting. Minneapolis: University of Minnesota Libraries Publishing.
Accessed July 8, 2020. https://open.umn.edu/opentextbooks/textbooks/4. 2016
Franklin, Mitchell. Principles of Accounting, Volume 1: Financial Accounting. Houston,
Texas: Rice University. May 2019. https//openstax.org/details/books/financial-
accounting-principles
International Accounting Standards Board. IAS 1 Presentation of Financial
Statements. IFRS. Jan. 23, 2020. https://www.ifrs.org/issued-standards/list-of-
standards/ias-1-presentation-of-financial-statements/
Manalaysay, Benedick G. Fundamentals of Accountancy, Business and Management
2. Mandaluyong City: Anvil Publishing, 2017.
Ong, Henry. The Financial Adviser. 5 Money Tips from Chinkee Tan. December 27,
2019. https://financialadviser.ph/5-money-tips-from-chinkee-tan/

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