This document discusses fund flow statements. It defines fund flow as the movement of funds within working capital and explains that a fund flow statement tracks sources and uses of funds over a period of time. The document outlines the objectives, preparation, and differences between fund flow and cash flow statements. It provides an example of preparing a schedule of changes in working capital and the related sources and uses of funds statement.

1. BY:
WEENA YANCEY
KYRMEN
SINGLEMAN
DIPJOYTI

2.  WHAT IS FUND FLOW?
 DIAGRAM OF FUND FLOW
 USES AND LIMITATIONS OF FUND FLOW
STATEMENT.
 OBJECTIVES OF FUND FLOW STATEMENT.
 DIFFERENCE BETWEEN FUND FLOW AND CASH
FLOW STATEMENT
 PREPARATION OF FUND FLOW STATEMENT.
 CONCLUSION.
 BIBLIOGRAPHY.

3.  IN NARROW SENSE,IT MEANS CASH ONLY AND A
FUNDS FLOW STATEMENT PREPARED ON THIS BASIS IS
CALLED A CASH FLOW STATEMENT.SUCH A
STATEMENT ENUMERATES NET EFFECTS OF THE
VARIOUS TRANSCATIONS ON CASH AND TAKES INTO
ACCOUNT RECIPTS AND DISBURSEMENT OF CASH.
 IN A BROADER SENSE, THE TERM ‘FUNDS’ REFERS TO
MONEY VALUES IN WHATEVER FORM IT MAY EXSIST.
MEANS ALL FINANCIAL RESOURCES USED IN BUSINESS
WHETHER IN THE FORM OF MEN,MATERIAL
,MONEY,MACHINERY,METHODES ETC.
 IN A POPULAR SENSE THE TERM ‘FUNDS’ MEANS
WORKING CAPITAL WHICH IS THE EXCESS OF
CURRENT ASSETS OVER CURRENT LIABILITIES

4.  TRANSFER OF ECONOMIC VALUES FROM ONE
ASSET OF EQUITY TO ANOTHER.
 MOVEMENT OF FUNDS IN WORKING CAPITALS
 IT TAKES PLACE WHEN ANY TRANSACTION
MAKES CHANGES IN THE AMOUNT OF FUNDS
AVAILABLE BEFORE HAPPENING OF THE
TRANSACTION.
 IF THERE IS INCREASE OF FUNDS,IT IS SOURCE
OF FUNDS
 IF THERE IS A DECREASE OF FUNDS,IT IS AN
APPLICATION OF FUNDS
INCREASES SOURCE OR INFLOW
DECREASE APPLICATION OR OUT FLOW

5. USES:
 EXPLAINS THE FINANCIAL CONSEQUENSES OF
BUSINESS.
 DEBT CAPITAL IS ESSENTIAL FOR INCREASED
PROFITS.
 ACTS AS AN INSTUMENT FOR ALLOCATION
OF COMPANY’S RESOURCES.
 TEST FOR EVALUATING USE OF WORKING
CAPITAL BY THE MANAGEMENT
INFORMATION.

6.  IGNORES NON – FUND ITEMS.
 DOES NOT REVEAL SHIFTS ITEMS MAIKING UP
THE CURRENT ASSETS AND CURRENT
LIABILITIES.
 IT IS HISTORICAL IN NATURE.

7.  TO INDICATE THE RESULTS OF CURRENT
FINANCIAL MANAGEMENT.
 TO LAY EMPHASIS ON THE MOST SIGNIFICANT
CHANGES THAT HAS TAKEN PLACE, DURING A
SPECIFIC PERIOD.
 TO SHOW HOW GENERAL EXPANSION IN THE
BUSINESS HAS BEEN FINANCED OR TO
DESCRIBED THE SOURCES FROM WHICH
ADDITIONAL FUNDS WERE DERIVED.

8.  TO ESTABLISHED THE RELATIONASHIP
BETWEEN PROFIT FROM OPERATIONS,
DISTRIBUTION OF DIVIDEND AND RISING OF
CAPITAL OR CONTRATING OF LOANS.
 TO GIVE RECOGNITION TO THE FACT THAT A
BUSINESS EXISTS IN THE FLOW OF FUNDS AND
IS NOT STATIC ORGANISATION.

9. FUND FLOW STATEMENT CASH FLOW STATEMENT
1. IT IS BASED ON THE CONCEPT
OF WORKING CAPITAL..
2. IT REVEALS CHANGES IN
WORKING CAPITAL POSITION
BETWEEN TWO BALANCE SHEET
DATES.
3.CLASSIFICATION OF ASSETS AND
LIABILITIES INTO CURRENT AND
NON – CURRENT CATEGORIES IS
ESSENTIAL.
4. THESE STATEMENTS MATCH
SOURC ES AND APPLICATION OF
FUND.
1. IT IS BASED ON THE CONCEPT
OF CASH.
2. IT REVEALS CHANGE IN CASH
POSITION BETWEEN TWO
BALANCE SHEET DATES.
3. NO SUCH CLASSIFICATION
NECESSARY.
4. IT COMMENCES WITH OPENING
CASH BALANCE AND ENDS WITH
CLOSING CASH BALANCE.

10. FUND FLOW STATEMENT CASH FLOW STATEMENT
5. AN IMPROVEMENT IN CASH
POSITION RESULTS IN THE
IMPROVEMENT IN WORKING
CAPITAL.
6. IT IS LONG –TERM TOOL
FINANCIAL ANALYSIS.
5. AN INCREASE IN CASH ON HAND
DOES NOT RESULT IN INCREASE IN
WORKING CAPITAL..
6. IT IS A SHORT – TERM TOOL OF
FINANCIAL ANALSIS.

11. ISSUE OF
SHARES
SALES OF FIXED
ASSETS
Long term
borrowings
Operational
profit
Funds
Redemption of
pref.shares.
Purchase of
fixed assets.
Payment or long
term loans.
Payment of
tax/Dividend.

12. INVOLVES TWO STATEMENTS:
1. STATEMENT OR SCHEDULE OF CHANGES IN
WORKING CAPITAL
2. SOURCES AND USES OF FUND STATEMENT.

13.  RULES FOR PREPARING THE STATEMENT OF CHANGES IN
WORKING CAPITAL:
1. INCREASE IN CURRENT ASSET, RESULTS IN
INCREASE (+) IN WORKING CAPITAL.
2. DECREASE IN CURRENT ASSET, RESULTS IN
DECREASES (-) IN WORKING CAPITAL.
3. INCREASE IN A CURRENT LIABILITY, RESULTS
IN DECREASE (-) IN WORKING CAPITAL.
4. DECREASE IN A CURRENT LIABILITY, RESULTS
IN INCREASE (+) IN WORKING CAPITAL.

14. PREVIOUS YEAR
RS.
CURRENT
YEAR
RS.
EFFECT OF
WORKING
CHANGE ON
CAPITAL
INCREASE
RS.
DECREASE
RS.
CURRENT
ASSETS
CASH
BANK
B/R
DEBTORSSTOCK
PREPAID
EXPENSES
TOTAL (a)
CURRENT
LIABILITIES
OUTSTANDING
EXP
B/P
CREDITORS

15. TOTAL (b)
WORKING CAPITAL (a-b)
NET INCREASE/DECREASE IN
WORKING CAPITAL

16. Eg.: FROM THE FOLL. TWO BALANCE SHEETS ON
31.03.2001 AND 31.03.2002 PREPARE A SCHEDULE
OF CHANGES IN WORKING CAPITAL.
LIABILITIES 2002
RS.
2001
RS.
ASSETS 2002
RS.
2001
RS.
SHARE
CAPITAL
P and L A/C
9%
DEBENTURES
TRADE
CREDITORS
OUTSTANDING
CREDITORS
3,25000
1,20000
2,00000
98,000
2,000
7,45000
3,00000
1,00000
2,00000
75,000
5,000
6,80000
LAND &,
BUILDINGS
MACHINERY
STOCK – IN
TRADE
DEBTORS
CASH
5,00000
1,00000
1,00,000
30,000
5,000
7,45,000
4,00000
1,60000
80,000
36,000
4,000
6,80000

17. 2001
RS.
2002
RS.
EFFECTS
ON
CAPITAL
WORKING
INCREASE
(+)
RS.
DECREASE
(-)
RS.
CURRENT ASSETS:
STOCK – IN TRADE
DEBTORS
CASH
(a) TOTAL CURRENT
ASSET
80,000
36,000
4,000
1,10,000
30,000
5,000
30,000
1,000
6,000
1,20000 1,45,000

18. CURRENT LIABILITIES:
TRADE
CREDITORS
OUTSTANDING
CREDITORS
(b) TOTAL CURRENT
LIABILITIES
WORKING CAPITAL (a
-b)
NET INCREASE IN
WORKING CAPITAL
75,000
5,000
98,000
2,000
3,000
23,000
5,000
80,000 1,00,000
40,000
5,000
45,000
45,000 45,000 34,000 34,000

19. SOURCES RS. APPLICATIONS RS.
ISSUES OF SHARES
ISSUES OF
DEBENTURES
LONG TERM & MIDDLE
– TERM LAONS TAKEN
SALES OF
INVESTMENTS
SALES OF FIXED
ASSETS
TRADING PROFITS
NON – TRADING
INCOME
NET DECREASE IN
WORKING CAPITAL, AS
PER SCHEDULE OF
CHANGES IN WORKING
REDEMPTION OF SHARES
REDEMPTION OF
DEBENTURES
REPAYMENT OF LOANS
PURCHASE OF
INVESTMENTS
PURCHASE OF FIXED
ASSETS
PAYMENT OF DIVIDENDS
(LAST YEAR AND INTERIM)
FUNDS LOST FROM
OPERATIONS
NON – TRADING PYMENTS
NET INCREASE IN WORKING
CAPITAL AS PER SCHEDULE
OF CHANGES IN WORKING
CAPITAL

20. Fund flow statement is very important for every
organization. It can really determine how the business
should be carried on in the future. we can proper
utilize the budget of the company and the strategy to
cope the financial problems of the company through
the preparation of the fund flow statement. As we
know the aim of fund flow statement is to know the
working capital of the company whether it increases or
decreases during a given period of time. So it is a
main tool to make a organization to survive in the
future.

21.  SRINIASAN N.P. & MURUGAN N. SAKTHIVEL, 4TH
EDITION 2004,ACCOUNTING FOR MANAGEMENT,
S.CHAND PUBLICATIONS, NEW DELHI, p. 258 –
263.
 http://www.futureaccountant.com/funds-flow-cash-
flow/study-notes/funds-flow-statement-inflow-
outflow-sources-applications-funds.php
 http://www.scribd.com/doc/13261978/Analysis
-of-Fund-Flow-Statement-ppt#fullscreen:on

22. THANK
YOU