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Presented by

:

Ritesh Kumar Tiwari

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Fund

Fund means Working Capital.

Working Capital

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Fund F low Statement

Fund flow statement is

a statement shows the changes in funds

b/w two balance sheet of two different dates.

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Format of Fund Flow StatementFund Flow Statement

(As on..)

Sources of Funds Amount Application of Funds Amount

Issue of share capital . Redemption of pref. share ..

Issue of debenture . Redemption of debenture ..

Raising of long term loan . Payment of long term loan ..

Sales of fixed assets . Purchase of fixed assets ..

Interest received . Interest paid ..

Dividend received . Dividend paid ..

Refund of Taxes . Payment of Taxes ..Decrease in working capital . Increase in working capital ..

Fund from operation . Fund lost in operation ..

TOTAL .. TOTAL ..

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Importance of Fund F low Statement

Identification & Analysis of changes in working capital

Evaluation of firms financing

Knowing the overall creditworthiness of a firm

An instrument for allocation of resources

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Increase in Working Capital

Decrease in working Capital

Statement ofChanges in

Working Capital

Funds from Operation (Profit)

Funds lost in operation (Loss)

Adjusted Profit& Loss A/c

Sources of Funds

Application of Funds

Fund FlowStatement

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Example:- The Balance Sheet of ABC Ltd. at the end of 2006 and 2007 are as

follows: 31 March 2006 31 March 2007

Liabilities:

Accounts Payable 15,000 20,000

Notes Payable 25,000 10,000Other Current Liabilities 10,000 15,000

6 % Bonds ------ 20,000

Retained Earning 80,000 1,10,000

Mortgage ------ 10,000

Shares 50,000 50,000

TOTAL 1,80,000 2,35,000

Assets:

Cash 10,000 5,000

Marketable Security 10,000 -------

Inventory 70,000 1,05,000

Receivables 30,000 40,000

Fixed Assets 1,00,000 1,40,000

Accumulated Depreciation(-)40,000 (-)55,000

TOTAL 1,80,000 2,35,000

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You are required to prepare a Statement of Changes in Working Capital and

Fund Flow Statement.

Statement of Changes in Working Capital

Particular 2006 2007 Effect on Working Capital

Increase Decrease

Current Assets: Rs. Rs. Rs. Rs.

Cash 10,000 5,000 ----- 5,000

Marketable Security 10,000 ----- ----- 10,000

Inventory 70,000 1,05,000 35,000 -----Receivable 30,000 40,000 10,000 -----

1,20,000 1,50,000

Current Liabilities:

Accounts Payable 15,000 20,000 ----- 5,000

Notes Payable 25,000 10,000 15,000 -----

Other Current Liabilities 10,000 15,000 ----- 5,000

50,000 45,000

Net Increase in Working Capital(Balance) ----- 35,000

TOTAL 60,000 60,000

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Adjusted Profit & Loss Account

Particular Amount Particular Amount

To Depreciation

(55,000 40,000)

15,000 By Opening Balance of P & L

A/c

80,000

To Closing Balance of P & L

A/c

1,10,000 By Fund from Operation

(Balance)

45,000

1,25,000 1,25,000

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Fund Flow Statement( As on 31 march 2007)

Sources Amount Application Amount

Mortgage 10,000 Purchase of Fixed Assets 40,000

6 % Bonds 20,000 Net Increase in Working

Capital

35,000

Funds from Operation 45,000

75,000 75,000

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Thank You