The document discusses the statement of cash flows (SCF), which summarizes a company's cash inflows and outflows over a period of time. It explains that the SCF has three sections - operating, investing, and financing activities. The operating section covers cash from core business activities. The investing section includes cash from purchases/sales of long-term assets. The financing section covers cash from raising/repaying capital from shareholders and lenders. Examples of cash flow line items are provided for each section. The document also introduces how to prepare the SCF using the direct method.

1. Turorial in making SOC

2. By:Analie
Adarbe

3. What Is the Statement of Cash
Flow (SCF)?

4. Sections of the SCF
1. Operating activities
 Cash flows from operating activities are primarily derived from
the main revenue producing activities of the business, which
means that the transactions reported in this section represents
the cash components of the events that enter into the
determination of net income in the SCI.
 On revenue: Revenue is reported on the SCI on the year when
goods and services are delivered. On the other hand, collections
from customers will be reported on the SCF on the year when
cash is received.
 On expenditures: Expenses are reported on the SCI based on
three accrual approaches – matching principle, rational allocation
and immediate recognition. However, the cash disbursements for
these expenses are reported on the SCF on the year payments
are made.

5.  The SCI shows a net income computed based on accrual.
On the other hand, SCF shows net cash flows provided by
or used in operating activities.
 Examples of cash flow transactions reported under
operating activities are:
a. Cash received from customers (cash receipts from
sale of goods and rendering of services)
b. Cash received from fees, commissions, and other
income
c. Cash payments to suppliers
d. Cash payments to employees
e. Cash payments for other operating expenses
f. Interest payments

6. 2.Investing activities
 Reported within this section are cash used for acquisition of
property, plant and equipment, intangible assets and other
long term assets as well as cash proceeds from the disposals
of such long term assets.
 Cash flows from investing activities hints on the company’s
ability to generate cash in the future.
 A negative cash flows from investing activities implies that the
company used cash to acquire long-term assets intended to
generate cash and revenue in the future. On the other hand,
a positive cash flow from investing activities may indicate that
the company is divesting or downsizing.

7.  Examples of cash flow transactions reported under
investing activities:
a. Cash payments to acquire property, plant and
equipment, intangibles and other long-term
assets.
b. Cash receipts from sale of property, plant and
equipment, intangibles and other long-term
assets.
c. Cash loans made to other parties (long term note
receivable).
d. Cash collection on long term note receivable.

8. 3. Financing activities
 Cash flow from financing activities is the last section of the
SCF. This section reports cash received and cash paid to
equity owners and long-term creditors.
 Examples of cash flow transactions reported under financing
activities:
a. Cash received from issuing common shares (or capital
contribution from owners).
b. Cash received from issuing notes or getting a long term loan
from a bank.
c. Cash dividends distributed to shareholders.
d. Cash withdrawals of owners.
e. Cash payment for principal of long-term loan.

9. T-account of Cash

10. T-account of Cash

11. T-account of Cash

12. Preparing the SCF
DIRECT METHOD

13. Preparing the SCF

14. Preparing the SCF