Fund Flow Statement

A Device of Financial Analysis

Basic Financial Statements :

a) Balance Sheet Financial position as on date b) Profit&Loss A/c reflects the result of the business operation for a period of time
Both statements do not reveal about the changes in financial position.

Fund Flow Statement shows the movement of funds For analysis and planning purposes. In simple words it is a statement of Sources and Application of Funds

Dr. Ratnesh Chaturvedi

M.Com.,ICWA, MBA-Finance

What is Fund ????

Sorry Friend Today I have no fund

Fund means Cash only ?

In Business context Fund is not only Cash but all those assets which can be easily converted into Cash. Fund = Current Assets Current Assets are those assets which can be converted into cash within a financial year. Components of CA Cash, B/R, Debtors, Stock, Prepaid
expenses, Accrued incomes, Loans and advances

Fund = Current Assets only ? There are some liabilities which have to be paid within a financial year i.e. Current Liabilities Components of CL B/P, Creditors, Outstanding expenses, Dividend payable, Proposed dividend, Bank overdraft, etc. Fund = Current Assets Current Liabilities = WC
Dr. Ratnesh Chaturvedi
M.Com.,ICWA, MBA-Finance

What is Flow ????

Flow of Funds : Change in Fund position due to any transaction If Funds position increases Inflow Sources of Fund If Funds position decreases Outflow Application of Fund

Flow of Funds
Current Assets
Yes Yes No No Yes

Current Liabilities
Yes

Non Current Assets

Non Current Liabilities

Procedure for preparing FFS :

Funds Flow Statement is prepared by comparing two balance sheets and with the help of such other information derived from the accounts as may be needed. It consists of two parts : A. B.
M.Com.,ICWA, MBA-Finance

Schedule of changes in Working Capital Statement of Sources and Application of Funds

Dr. Ratnesh Chaturvedi

A. Schedule of changes in Working Capital :

B. Statement of Sources and Application of Funds :

Dr. Ratnesh Chaturvedi

M.Com.,ICWA, MBA-Finance

C. WORKINGS :
Profit / Loss from operation :
Current Year Net Profit Add : Depreciation Preliminary Expenses written off Goodwill or Patents written off Discount on Debentures/Bonds written off Fixed Assets Discarded or written off Loss on sale of Fixed assets Loss on sale of Trade Investments Less : Profit on Sale of Fixed Assets or Investment Dividend or interest received on trade investments 0000 00 00 00 00 00 00 00 ___ 0000 00 00 ____ 0000

Profit From Operation

OR

P&L A/C Balance ( Current Year ) P&L A/C Balance ( Last Year ) Add : Transfer of Reserve Proposed Dividend Interim dividend Other Reserves Net Profit For Current Year0000

0000 0000 0000 00 00 00 00 ____

Dr. Ratnesh Chaturvedi

M.Com.,ICWA, MBA-Finance

C. WORKINGS :
Increase or Decrease in Share Capital or Long Term Loans : Share Capital or Long Term Loans in Current Year 0000 Share Capital or Long Term Loans in Previous Year 0000 Increase or Decrease 0000 Increase or Decrease in Fixed Assets : Cost of Fixed assets ( Current Year ) Less : Cost of Fixed asset ( Previous Year ) Cost of Fixed assets Sold or written off Purchase of Fixed Assets 0000 0000 0000 0000 0000

or
Written Down Value ( Closing Balance ) Written Down Value ( Opening Balance ) 0000 Less : Current Years Depreciation 00 Written down value of fixed assets sold 0000 Purchase of Fixed Assets Sale of Fixed Assets : Previous years balance at cost Current years balance at cost Cost of Fixed Assets Sold Add: Profit/ (loss) Sales Proceeds Depriciation : Accumulated Depreciation (Closing Balance) Accumulated Depreciation (Opening Balance) Less: Accumulated Depreciation on Asset sold Provision For Depreciation ( Current Year ) OR Fixed Asset ( Opening Balance ) 0000 (At cost written down value ) Add : Purchase of Fixed Assets (Cost) 0000 Less : Fixed Asset Sold ( at cost or written down value ) 0000 Fixed asset closing balance 0000 (At cost written down value ) ____ Provision For Depreciation ( Current Year ) 0000 Dr. Ratnesh Chaturvedi
M.Com.,ICWA, MBA-Finance

0000 0000

0000 0000 0000 000 0000 0000 0000 000 ____ 0000

Importance of Fund Flow Statement :

1. Helps in analysis of operation. 2. Helps in proper allocation of business 3. Acts as a future guide 4. Helps in appraising the use of working capital.

Limitation of Fund Flow Statement :

1. It is not a substitute of Financial statements. 2. It can not reveal continuous changes.

Dr. Ratnesh Chaturvedi

M.Com.,ICWA, MBA-Finance