Theatre workshop at Govt Model Sr Sec School Sec 47 D Chandigarh
Md.ahadulla sec 'd'. reg.no.t-6195
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Transcript of Md.ahadulla sec 'd'. reg.no.t-6195
Presented By:Md.Ashadulla
PGDM.T-6195
Why we prepare fund flow statement?
The balance sheet and income statement are the traditional basic financial statement of a business enterprise. A serious limitation of these statements is that they do not provide information regarding changes in the firm’s financial position during a particular period of time. They fail to answer following question
Does the firm possess adequate working capital? How much funds have been generated from
operations? Why did the firm not pay dividend in spite of
adequate profit?
MEANING OF FUND The term fund has a variety of meaning such as cash
fund, capital fund and working capital fund.1.Cash fund :– In a narrow sense, fund means only cash. ‘Cash flow
statement’ portrays net effect of the various business transactions on cash into account receipts & disbursement of cash.
This concept of preparing fund flow statement is not accepted, as there are many such transactions which do not affect cash but represent the flow of fund .
for example: purchase of furniture on credit does not affect cash but there is flow of fund.
2. Capital fund: – Here fund means all financial resources used in the
business, whether in the form of men, money, material, machine & others.
3.Net working capital :– Net working capital means difference between
current asset and current liabilities .funds generally refers to cash or cash equivalent or to working capital.
In the above figure the dotted line displays there will be no flow of fund & the dark line displays the flow of fund.
Preparation of Fund Flow Statement The changes which occurred in the current accounts as
a result flow of fund are reflected in a statement known as ‘schedule of changes in working capital’ .
The similar changes in non current accounts are shown in ‘Fund Flow Statement’.
Therefore, following two statements under this techniques .1. Statement or Schedule of Changes in Working Capital.2. Statement of Sources and Uses of Funds or Funds Flow Statement.
Schedule of Changes in Working Capital:- It discloses the changes in individual item of current asset &
current liabilities between two period & there effect on working capital. Working capital will increase when there is an increase in current asset and decrease in current liabilities, whereas, working capital will decrease when there is a decrease in current asset & increase in current liabilities.
Net increase in working capital is treated as use of funds & the net decrease in working capital is treated as source of funds.
ItemItem
(A) Current (A) Current AssetsAssetsCash at bank Cash at bank
Cash in handCash in hand
Stock in tradeStock in trade
DebtorsDebtors
Bills receivableBills receivable
Advance paymentAdvance payment
Short term investmentShort term investment
Prepaid expensePrepaid expense
Accrued incomeAccrued income
Total (A) Total (A)
(B) Current Liabilities(B) Current Liabilities
(1) Short term loans(1) Short term loans
(2) Bank overdraft(2) Bank overdraft
(3) Creditors(3) Creditors
(4) Bills payable(4) Bills payable
(5) Outstanding expenses(5) Outstanding expenses
(6) Unclaim dividend(6) Unclaim dividend
Total (B)Total (B)
Net Working Capital (A-B)Net Working Capital (A-B)
Incraese / Decrease in Working Incraese / Decrease in Working Capital Capital
TotalTotal
Previous YearPrevious Year Current Current YearYear
Effect onEffect on
Incraese Rs.Incraese Rs.
Working Working captialcaptial
Decrease Rs.Decrease Rs.
Statement or Schedule of Changes in Working Capital.
Sources of Fund Sources of Fund AAmountmount
Fund from operationFund from operation
Issue of shareIssue of share
Issue of debentureIssue of debenture
long term loanslong term loans
Sale of fixed assets /Sale of fixed assets /
InvestmentInvestment
Non trading receiptsNon trading receipts
Decrease in workingDecrease in working
capitalcapital
(if any)(if any)
Uses Of FundsUses Of Funds AmountAmount
Loss from operationLoss from operation
Redemption of Redemption of
preference sharespreference shares
Redemption ofRedemption of
debenturesdebentures
Repayment ofRepayment of
long term loanslong term loans
Purchase of fixed assets Purchase of fixed assets
/ Investments/ Investments
Payment of dividend & taxesPayment of dividend & taxes
Increase in working capitalIncrease in working capital
(if any)(if any)
Particular Particular AmountAmount
DepreciationDepreciation
Loss on sale of fixed assetsLoss on sale of fixed assets
Under writing commissionsUnder writing commissions
Discount on issue of shares & Discount on issue of shares &
debenturesdebentures
Preliminary expense written offPreliminary expense written off
Deferred revenue expenses Deferred revenue expenses
Goodwill written off Goodwill written off
Patent or trademarkPatent or trademark
Provision for taxes Provision for taxes
(If treated non current(If treated non current))
Particular Particular AmountAmount
Profit or gain on sale of Profit or gain on sale of
fixed assetfixed asset
Dividend received Dividend received
Interest received ofInterest received of
investmentinvestment
Profit on revaluation Profit on revaluation
of assetof asset
Fund from operationFund from operation