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Funds Flow Statement
Funds Flow Statement
Luvnica Rastogi
Amity International Business School
Imp Website:
www.investorwords.com
Meaning
Working Capital
In popular sense, the term Fund is used to
mean working capital i.e. the excess of
current assets over current liabilities.
Therefore, in this sense, fund flow
statement includes all the transactions
affecting current assets and current
liabilities.
MEANING OF FLOW IN
FUNDS
Before understanding the meaning
of flow in funds, it is necessary to
classify the balance sheet of a
concern into four parts as shown
below-
1. Non-Current Liability
3. Non-Current Assets
Share Capital
Goodwill
Debentures
Land & Buildings
Other Long-term loans
Plant & Machinery
Reserve & Surplus
Motor Vehicles
Security Premium
Long-term Investments
Capital Redemption reserve
Preliminary Expenses
General Reserve
Discount on shares
Profit & Loss Account
Miscellaneous Expenses
2. Current Liabilities
4. Current Assets
Creditors
Debtors
Bills Payable
Bills Receivable
Short-term loans
Advances
Bank Overdraft
Short-term
investments
Advance Payment Received
Stock in hand
Outstanding Expenses
Cash in hand
Provision for taxation
Cash at Bank
TOTAL
TOTAL
The arrows explain when transaction will constitute flow of funds .
1. NON-CURRENT LIABILITIES
These liabilities are not payable within a
year and out of current assets. These
liabilities are generally payable either in
the long-period or at the close of the
business. For example, see item (1) in
the above balance-sheet.
Contd..
1.
2.
3.
SOURCES
Funds from
business Ops
Other Incomes
Sale of non-current
assets
Long
term
Issue
of additional
borrowings
equity or preference capital.
USES OF WC
Losses from
business ops
Purchase
of non-
current assets
Redemption
debentures/preference shares.
Dividends
shareholders
12/08/15
to
of
TO CONCLUDE
We
shall
include
only
those
transactions in funds flow which affect
current assets or current liabilities, on
one hand, and a fixed asset or longterm liabilities or owners equity on
the other.
1.
2.
3.
4.
5.
6.
7.
Contd
Cash
Debtors
Stocks
Bill Receivables
Advance payment
Accrued income
Marketable Securities or
Short-term Investment
Decre
-ase
Particulars
Current Liabilities:
Creditors
Bills Payable
Bank Overdraft
Outstanding Expenses
Short-term
Loan etc.
Increase or
Decrease in Working
Capital
Dec.
(-)
1.
2.
3.
4.
Contd.
Sources of Funds:
The following are the sources from which funds
come:
1.Funds from operations
2.Income from investments
3.Issue of shares and debentures
4.Raising a loan
5.Sale of fixed assets and long-term
investments
6.Receipt of interest on non-trade investment,
dividend, refund of tax etc.
7.Decrease in working capital etc.
or
Amount
Rs.
Amount
Rs.
To Depreciation
To Goodwill Written off
To preliminary Expenses
written off
To Transfer to sinking
fund
To Loss on sale of fixed
Assets
To Closing Balance of P&L
Appropriation A/c
By opening Balance
of P&L
Appropriation A/c
By Dividend
Received
By Over provisions
Written Back
By Funds from
operations
(Balancing
Figure)
Source of Funds
-Fixed Assets
+Fixed
Liabilities
+Share Capital
Application of
Funds
+Fixed Assets
-Fixed Liabilities
-Share Capital
Contd.