CASH FLOW STATEMENT  design to provide information about the change in an enterprise’s cash and cash equivalents.

Categories of Cash Flows Statement  Operating Activities  Investing Activities  Financing Activities

 Operating Activities Cash flows derived from the principal revenue producing activities. converts the items reported on the income statement from the accrual basis of accounting to cash.

Cash flows derived from the acquisition and disposal of long term assets and other investment not included in cash equivalent.  Investing Activities

Cash flows derived from equity capital and borrowings of the enterprise  Financing Activities

Identifying the effect on cash

General Assumptions:

For a change in assets (other than cash) – the change in the Cash account is in the opposite direction For a change in liabilities and owner’s equity – the change in the Cash account is in the same direction.

ABC Corporation Additional information: 1. Included in the P400,000 income reported in the income statement is the P20,000 loss from sale of an equipment with carrying cost of P40,000 at the end of the year, net of P10,000 accumulated depreciation. 2. Part of total dividends declared was already paid.

Journal entry for no. 1 Cash 20,000 Loss from sale 20,000 Accum. Depreciation 10,000 Equipment 50,000 (to record the sale of equipment)

Summary: