Fund Flow Statement

Funds generally refers to net working capital (i.e., Total Current Assets -
Total Current Liabilities)
Fund flow or flow of funds refers to change in the working capital. If a
transaction leads to increase in the working capital there is said to be inflow
of funds or application of funds.
A fund flow statement is a statement of sources and uses of funds. In
other words it is a statement which shows how the net working capital is
obtained and how it is put to use. The fund flow statement is also known by
different names such as Statement of sources and application of funds.

How to Prepare a Fund Flow Statement

Two years Balance sheet with some additional information will be given in the
problem
Steps in Preparation of Fund Flow Statement

1. Preparation of Schedule of changes in working capital using only

current assets and current liabilities of 2 years given in the problem – To
find out Net increase or Decrease in Working Capital
2. Preparation of necessary Ledger accounts to find out hidden
information of source or application of funds
3. Preparation of Adjusted profit and loss account to find out the funds
from operations or funds lost in operation
4. Preparation of Funds Flow statement to know the sources of inflow and
outflow of funds

Schedule of Changes in working capital

Particulars 2016 2017 Increase in Decrease in
Working Working
Capital Capital
Current Assets
Debtors xxx xxx
Stock xxx xxx
Cash xxx xxx
Bank xxx xxx
B/R xxx xxx
Prepaid Expenses xxx xxx
Temporary Investments xxx xxx
Current Liabilities
Creditors xxx xxx
BOD xxx xxx
Cash Creditors xxx xxx
RBD etc xxx xxx
Net Decrease1 / Increase2 xxx xxx xxx xxx
in W.C (transferred to xxx1 xxx2
FFS) xxx xxx
Total
 Adjusted P&L a/c
To Non operating expenses Rs. By Balance b/d Rs.
(such as depreciation, xxx (Last year profits as per P&L xxx
intangible assets and fictitious Appropriation a/c)
asset written off, loss on sale By Non-operating incomes (such
of fixed assets, damages paid as profits on sale of xxx
under law, gifts paid, premium investments and fixed assets,
payable on redemption of dividends on investments
debentures or preference received, rent, gifts, damages
shares etc) xxx received, discount on
To Appropriation of profits (such redemption of Pref Shares or
as transfer to general reserve Debentures ) xxx
or any other reserves, interim xxx By Funds from operations or
dividends paid, final dividends xxx Operating Profits
declared, or proposed xxx (Difference amount to be xxx
dividends, tax provision etc) transferred to FFS under
To Funds Lost due to operations Sources)
(Difference)
To Balance c/d (Net profits and
the end of the year)

Fund Flow Statement

Sources of Funds Rs. Applications of Funds Rs.
a) Funds from operations or xxx a) Purchase of fixed assets and xxx
operating profits (transferred investments. xxx
from adjusted P&L a/c) xxx b) Income tax paid xxx
b) Sale price of fixed assets, c) Dividends paid
investments etc. xxx d) Redemption of preference xxx
c) Issue of shares and xxx shares or debentures or long xxx
debentures for consideration xxx term loans
of current assets only. e) Net increase in working
d) Bank Loan raised xxx capital
e) Non-operating incomes such xxx
as dividends or interest on xxx xxx
investments received etc.
f) Any other sources.
g) Net decrease in working
capital