FUND FLOW STATEMENT

Presented by:

Ritesh Kumar Tiwari

Fund

Fund means Working Capital.

Working Capital Current AssetsCurrent

Liabilities

Fund Flow Statement

Fund flow statement is –

a statement shows the changes in funds

b/w two balance sheet of two different dates.

Sources of Funds- Issue of Shares- Sales of Fixed Assets- Decrease in working capital- Operational Profit- Long term borrowing

Application of Funds- Redemption of Pref. Shares- Purchase of Fixed Assets- Payment of long term loan- Operational Loss- Payment of Tax /Dividend

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 ……..

Importance of Fund Flow Statement

Identification & Analysis of changes in working capital

Evaluation of firm’s financing

Knowing the overall creditworthiness of a firm

An instrument for allocation of resources

• Increase in Working Capital• Decrease in working Capital

Statement of Changes in

Working Capital

•Funds from Operation (Profit)•Funds lost in operation (Loss)

Adjusted Profit & Loss A/c

• Sources of Funds• Application of Funds

Fund Flow Statement

Preparation of Fund Flow Statement

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 20,000Notes Payable 25,000 10,000Other Current Liabilities 10,000 15,0006 % Bonds ------ 20,000

Retained Earning 80,000 1,10,000Mortgage ------ 10,000Shares 50,000 50,000 TOTAL 1,80,000 2,35,000Assets:Cash 10,000 5,000Marketable Security 10,000 -------Inventory 70,000 1,05,000Receivables 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

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

Adjusted Profit & Loss Account

Particular Amount Particular AmountTo 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

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

Thank You