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Unit 4.2 - Fund Flow Statement WEB | PDF | Cash Flow Statement | Income Statement
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Unit 4.2 - Fund Flow Statement WEB

The Flow of Funds Statement summarizes a firm's financial position changes over time, detailing sources and uses of funds. It includes methods for calculating funds from operations, such as direct and indirect methods, and highlights the importance of analyzing working capital and business activities. This statement serves as a crucial tool for understanding financial health and planning future business activities.

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11 views14 pages

Unit 4.2 - Fund Flow Statement WEB

The Flow of Funds Statement summarizes a firm's financial position changes over time, detailing sources and uses of funds. It includes methods for calculating funds from operations, such as direct and indirect methods, and highlights the importance of analyzing working capital and business activities. This statement serves as a crucial tool for understanding financial health and planning future business activities.

Uploaded by

guttaindira425
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Flow of Funds Statement

A summary of a firm’s changes in financial


position from one period to another; it is
also called a sources and uses of funds
statement or a statement of changes in
financial position.
Flow of Funds Statement

What are “funds”?

All of the firm’s investments and


claims against those investments.
Extends beyond just transactions
involving cash.
Sources and Uses Statement

The letters labeling


the boxes stand for
Uses, Sources, A L
Assets, and Liabilities
(broadly defined).
The pluses (minuses)
indicate increases
S - +
(decreases) in assets
or liabilities.
U + -
Funds Flow Statement
Scientific Methods of Preparation of
Funds Flow Statement
Format of Schedule showing changes in
Working Capital
Funds from Operations

• Direct method
• Indirect method

Direct method

Funds from operations = Funds from operating


revenue less funds for operating expenses
Indirect Method

Profit & Loss Adjustment Account


Profit & Loss Adjustment Account
To Net Profit ( given ) ** By Non- Cash income
To Non - Cash Expenses Revaluation of assets **
Depreciation ** Revaluation of investments **
Written off entries **
To Loss on sale of assets ** By Profits on sale of assets **
To Bad debts ** By Dividend received
To Tax **
To Dividends **
To Transfer to reserves ** By Funds from Operations **
** **
Statement of Adjustment

• Net Profit as per Profit & Loss Account **

Add:
Non- Cash and non – operating expenses **

Less :
Non-cash and non- operating income **

Funds from operations **


Format of Funds Flow Statement

Sources / Inflow Rs Applications/Outflow Rs


Funds from Operations ** Funds lost in operations **
Sale of fixed assets ** Purchase of fixed assets **
Sale of Investments ** Purchase of investments **
Issue of shares ** Redemption of preference **
shares
Issue of debenture ** Redemption of debenture **
Loan taken ** Loan repaid **
Dividend Received ** Dividend paid **
Non-Operating income ** Non – operating expenses **
Decrease in working capital ** Increase in working capital **
** **
Need for Fund flow Statement

1. Shortcomings in Balance Sheet

2. Shortcomings in Profit & Loss Account


Importance of Funds flow Statement

1. Gives information about amount of working


capital and changes in the amount of working
capital.
2. It analyses Balance sheet to reveal the financing
& investing activities.
3. It analyses the Profit & Loss Account to reveal
the effect of business activities of the concern
on the flow of funds.
4. It is a tool for planning future activities of
business.

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