12

FUNDAMENTALS OF ACCOUNTANCY,
BUSINESS, AND MANAGEMENT 2
Week 5

Discuss the components and structures of a

CFS ABM_FABM12-If-10
prepare a CFS ABM_FABM12-If-11
Fundamentals of Accountancy, Business, and Management 2– Grade 12
Quarter 1– Financial Statements and their Analysis and Interpretation

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 12

FUNDAMENTALS OF ACCOUNTANCY,
BUSINESS, AND MANAGEMENT 2
Week 5

Discuss the components and structures of a CFS

ABM_FABM12-If-10
Prepare the Cash Flow Statement ABM_FABM12-
If-11

Department of Education • Republic of the Philippines

 This instructional material was collaboratively developed and
reviewed by educators from public and private schools, colleges, and
or/universities. We encourage teachers and other education stakeholders to
email their feedback, comments, and recommendations to the Department of
Education at action@deped.gov.ph.

We value your feedback and recommendations.

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Introductory Message
This module was written to inspire and motivate you that nothing can stop you
from learning! Learning does not only take place within the four walls of the classroom
and within the confines of the traditional school day. Learning is anywhere and
everywhere!

In a changing world like ours, we must adapt and find other ways of learning.
Modules are one way of delivering lessons that will help you understand specific topic
at your own pace and your own time.

This Supplementary Learning Resource is intended to be utilized by Grade 12

ABM learners. It is about Preparation of Cash Flow Statement. This can help you
develop your critical thinking capacity, improve your analytical ability, and enhance
your problem-solving skill. As you go through the lessons, we hope that you attain the
learning competency needed and be able to apply it in real life. Best of luck and God
Bless!

For the parents or guardian:

As facilitators, it is our utmost concern to guide and aid our learners in

understanding the best possible way that we can and this learning resource aims to
help them materialize that. It was prepared to assist the learners in attaining the
required learning competencies despite what we are facing right now by adapting to
the “new normal” of education. This Supplementary Learning Resource consists of
lessons, activities and exercises to meet the educational needs of our learners.
Answers are written at the end of this module.

There will be challenges and obstacles on the part of our learners, but as
facilitators, we are here to guide and supervise them. More importantly, we inculcate
the virtue of honesty while answering this module. Remember, you play a very big role
in your child’s learning!

Thank you and God Bless!

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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 such as a
story, a song, a poem, a problem opener, an
activity or a situation.

What’s 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 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 may provide you an activity or a

generalization 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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 Boost Learning In this portion, another activity will be given
to you to enrich your knowledge or skill of
the lesson learned. This also tends retention
of learned concepts.

Key This contains answers to all activities in the

module.

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 to help the learners understand how to
prepare Cashflow Statement (CFS). It is the continuation of the lesson about
Statement of Changes in Equity. This module consists of examples and instructions
in addition to different activities to boost the interest of the learners to engage in a
self-learning process. It is important to have adequate knowledge on major
categories of cash flow including methods of reporting cash flow from
operating activities because it will make the preparation of Cashflow Statement
much easier and more precise.

After going through this module, you are expected to:

1. discuss major categories of cash flow and the two methods of reporting cash
flow from operating activities; and
2. prepare a Cashflow Statement (CFS).

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 What I Know

Problem # 1
1. Which of the following types of transformations is not found in financial
statements?
a. Profits
b. Revenue
c. Selling prices
d. Assets
2. Accounting data flow from the
a. Balance sheet to the income statement
b. Income statement to the statement of owner’s equity
c. Statement of owner’s equity to the balance sheet
d. Both b and c are correct
3. Consider the steps in the accounting cycle. Which part of the accounting cycle
provides information to help a business decide whether to expand its
operations?
a. Post-Closing Trial Balance
b. Adjusting Entries
c. Closing Entries
d. Financial Statements
4. Which columns of the accounting work sheet show unadjusted amounts?
a. Trial Balance
b. Adjustments
c. Income Statement
d. Balance Sheet
5. Which columns of the work sheet show profit?
a. Trial Balance
b. Adjustments
c. Income Statement
d. Both b and c
6. Which situation indicates a loss on the income statement?
a. Total debits equal total credits
b. Total credits exceed total debits
c. Total debits exceed total credits
d. None of the above

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7. Supplies has a P60,000 unadjusted balance on your trial balance. At year-end,
you count supplies of P20,000. What adjustment will appear on your work
sheet?
a. Supplies 40,000
Supplies Expense 40,000
b. Supplies 20,000
Supplies Expense 20,000
c. Supplies 40,000
Supplies Expense 40,000
d. No adjustment is needed because the Supplies account already has a
correct balance.
8. Which of the following Is a cash inflow from financing activities?
a. Receipt from collections on notes receivable.
b. Receipt from interest on notes receivable.
c. Receipt from issuance of notes payable.
d. Receipt from sale of property and equipment.
9. In the adjusted trial balance, the owner’s equity account reflects
a. the beginning-of-the-period balance.
b. the increase to income and expense.
c. the period ending balance.
d. the results of adjusting entries.
10.Which of the following steps comes first in worksheet preparation?
a. Compute each account’s adjusted balance by combining the trial balance
and adjustment figures.
b. Compute profit or loss as the difference between total revenues and
expenses on the income statement.
c. Enter the account balances in the unadjusted trial balance columns and
the amounts.
d. Enter the adjusting entries in the adjustment columns and total the
amounts.

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 What’s In

Problem # 2
Extension of Account Balances to Proper Worksheet Columns
Cash Accounts
Receivable
Buildings Interest Expense
Salaries expense Interest Revenue
Mortgage Payable Unearned
Revenue
Prepaid Office Supplies
Insurance
Equipment Withdrawals
Utilities Expense Interest Payable
Land Accum. Dep Bldg
Service Revenues Rent Expense
Salaries Payable Accounts Payable

Required:
On the space provided, indicate in which column of the worksheet the
amount in each account would be extended by entering the following
letters: A. Income Statement, debit; B. Income Statement, credit; C.
Balance Sheet, debit; D. Balance Sheet, credit.

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 What’s New

The concept of cash includes not only cash. It also covers cash and cash
equivalents. Cash includes cash on hand and demand deposits which means
cash in bank. Cash equivalents include short-term highly cash investments
such as time deposits that can be converted into cash within three months
from date of investment.

Three major categories of cash activities:

1. Operating activities. This are the principal producing activities

representing cash collections from sale of goods and services, receipts for
rents, fees, commission, royalties and other revenues of an enterprise. It
also includes payments to suppliers of goods and services as well as
payments for expenses such as salaries, rent, insurance, repairs and
maintenance and other operating expenses. Cash flow from operating
activities involves current asset and current liability accounts.
2. Investing activities. These activities include cash proceeds from
disposal of non-current assets such as disposal of plant, property and
equipment, and proceeds from investments in bonds and shares of stock.
Investing activities also include payments for acquisition of plant,
property and equipment and investments in bonds and shares of stock.
Cash flow from investing activities involves non-current asset accounts.
3. Financing activities. These are represented by cash proceeds from long-
term borrowings such as bank loans, and cash investments of the
owners of the business and proceeds from sale of shares of stock in the
case of corporations. They also include withdrawals of cash by the
owners or payments of dividends in the case of corporations. Financing
activities involves long-term liabilities and equity accounts.

Reporting cash flow from operating activities

There are two methods of reporting cash flow from operating activities

1. Direct method. Under the direct method, major classes of cash receipts
and cash payments are presented in the statement to arrive at the cash
flow from operating activities. The major activities may be classified into

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 collection from clients and customers, payments to suppliers, and
payments for expenses.
2. Indirect method. Under the indirect method, the major classes of
receipts and payments are not presented. The procedure is to convert the
net income from the accrual basis to cash basis through a series of
adjustments for the effects of non-cash transactions such as the
increases or decreases in receivables, payables, prepayments, and
deferments of income and expenses.

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 What’s More

Charyze Santos Co. provided the following information for the purpose of
presenting the statement of financial position on December 31, 2017:
Cash in Bank 70,000
Notes Payable 150,000
Notes Receivables 130,000
Accounts Receivables 170,000
Accounts Payable 45,000
Santos, Capital ???
Santos, Withdrawal 12,000
Land 200,000
Intangible Assets 45,000
Service Income 350,000
Office Supplies Expense 4,000
Office Supplies 8,000
Salaries Expense 58,000
Salaries Payable 20,000
Loans Payable, due on December 15 2019 200,000
Furniture and Fixtures 45,000
Building 840,000
Computer Equipment 32,000
Advertising Expense 12,500
Prepaid Insurance 15,000
Insurance Expense 15,500
Depreciation Expense 29,600
Accumulated Depreciation- Building 29,600
Accumulated Depreciation- Comp Eqpt. 5,200
Depreciation Expense 5,200
Unearned Service Revenue 58,500
Accumulate Depreciation- F & F 8,000
Miscellaneous Expense 5,500
Utilities Expense 6,500
Depreciation Expense 8,000

Required
1. Compute for the value of capital
2. Prepare the Cash flow Statement of Charyze Santos Co.

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 What I Have Learned

Following are the accounts of Julie Anne Ocampo Merchandising Co. for
the month ended September 30, 2017.
Cash 164,440  
Computer Equipment 45,000  
Furniture and Fixture 23,500  
Service Vehicle 920,000  
Accounts Payable   76,750
Loans Payable   736,000
Ocampo, Capital   500,000
Sales   112,650
Sales Return and Allowances 5,100  
Sales Discount 1,460  
Purchases 209,250  
Purchase Return and
Allowances   18,500
Purchase Discount   2,050
Transportation-In 1,200  
Transportation-out 500  
Insurance Expense 18,000  
Rent expense 21,000  
Electricity expense 1,550  
Water Expense 250  
Telephone and Internet 1,750  
Salaries Expense 15,450  
Office Supplies Expense 15,000  
Miscellaneous Expense 2,500  
TOTAL

Note: The ending inventory is P 170,500

Required:
1. Compute for total debits and credits
2. Prepare the Cash Flow Statement of Julie Anne Ocampo
Merchandising Co. for the month ended September 30, 2017.

Department of Education • Republic of the Philippines

 What I Can Do

The following are the accounts of Vianca Lacson Review Center for the
year ended Dec. 31, 2015.
Cash 414,200
Accounts Receivable 44,000
Office Supplies 65,000
Review Materials 50,000
Prepaid Rent 51,000
Prepaid Insurance 17,000
Office Furniture 20,000
Computer Equipment 220,000
Land 477,000
Intangible Assets 100,000
Accounts Payable 70,000
Notes Payable, due on December 2020 440,200
Lacson, Capital 1,025,000
Lacson, Drawing 10,000
Fees Earned 129,500
Salaries Expense 100,000
Utilities Expense 25,000
Miscellaneous expense 20,000
Communication Expense 15,000
Business Permit 5,000
Transportation Expense 4,500
Expired portion of Insurance 17,000
Rent Expense 10,000
Depreciation Expense 17,000
Accumulated Depreciation- Computer
Equipment 10,000
Accumulated Depreciation- Office Furniture 2,000
Accumulated Depreciation- Repairs and
maintenance 5,000
???? ????
Required:
1. Compute for the total value of debits and credits
2. Prepare the Cash Flow Statement of Vianca Lacson Review Center

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 Assessment

Following are the adjusted trial balance of JPP Merchandising Co. for
the years 2012-2016

Chart of Accounts 2012 2013 2014 2015 2016

Cash 258,925 519,042 896,580 1,461,347 1,876,613
Required:
Accounts receivables 150,000 200,000 250,000 333,333 125,000
Inventories 300,000 400,000 500,000 667,000 250,000
1. Prepare the Statement of Cash Flow for the inclusive years 2012-2014 (Direct
Store Supplies
Method) 15,000 15,000 15,000 15,000 15,000
Computer
2. Prepare Equipment
the Statement of 25,000 25,000 25,000 25,000
Cash Flow for the inclusive years 2015-2016 (Indirect 25,000
Method) Depreciation- CE
Accumulated (8,300) (16,600) (25,000) (25,000) (25,000)
3. Prepare
Furniture the Statement of
and Fixtures Comprehensive
50,000 Income
50,000 for the year 201550,000
50,000 50,000
4. PrepareDepreciation-
Accumulated the StatementF&F of Changes in Equity
(10,000) for the year
(20,000) 2015
(30,000) (40,000) (50,000)
5. Prepare
Acounts the
Payable Statement of
- Inventory Financial Position
(200,000) for the year
(216,667) 2015
(266,667) (361,167) (55,500)
Salaries Payable (5,475) (5,475) (8,213) (8,213) (8,213)
Pulumbarit, Capital (350,000) (575,150) (950,300) (1,406,700) (2,117,300)
Pulumbarit, Withdrawal 225,150 375,150 456,400 710,600 85,600
SALES (1,800,000) (2,400,000) (3,000,000) (4,000,000) (1,500,000)
Cost of Sales 900,000 1,200,000 1,500,000 2,000,000 750,000
Salaries Expense 262,800 262,800 394,200 394,200 394,200
Rent Expense 48,000 48,000 48,000 48,000 48,000
Utilities Expense 45,600 45,600 45,600 45,600 45,600
Store Supplies Expense 60,000 60,000 66,000 66,000 66,000
Depreciation Expense- Comp Eqpt 8,300 8,300 8,400 - -
Depreciation Expense- F&F 10,000 10,000 10,000 10,000 10,000
Insurance Expense 10,000 10,000 10,000 10,000 10,000
Miscellaneous 5,000 5,000 5,000 5,000 5,000

References

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Valix, C. T., & Valix, C. M. Statement of Financial Position. In J. F. Peralta (Ed.),
Financial Accounting. Manila: GIC Enterprise &., 2017

Ballada, W. Basic Accounting Made Easy. Manila: DomDane Publisher, 2018

Hinayon, Mercedes J., et al. Fundamentals of Accounting, Vol. 1., 2012

Beticon, Josefina L, et al. Fundamentals of Accountancy, Business and Management 2.

Quezon City: Vibal Group, Inc., 2016

Manuel, Zenaida V., 21st Century Accounting Process, 18th ed. Quezon City: Raintree
Trading & Publishing, Inc.

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