Topic :- FUND FLOW STATEMENT B.Com:-2nd Sem, Code:- …

Presented by:

NIKITA JAIN

Assistant Professor

Topic :- FUND FLOW STATEMENT

B.Com:-2nd Sem, Code:- LNBCO 201

Subject:-Management Accounting

Fund

Fund means Working Capital.

Working Capital

Fund Flow Statement

Fund flow statement is –

a statement shows the changes in funds

b/w two balance sheet of two different dates.

Fund Flow Statement

1) The Funds flow statement contain all the details

of the financial resources which have became

available during an accounting period.

2) This statement discloses the amounts raised from

various sources of finance during a period.

3) It explains that how finance has been used in the

business.

4) It is a very useful tool in analysis of financial

statements which analyses the changes taking

place between two balance sheet dates.

Advantages Of Fund Flow Statement

•Shows Changes in The Financial Position

of the Company

Reason for Changes in

the Financial Position between Two

Accounting Periods

Level of Working Capital Adequacy

Future Business and Budget Projections

Company Image

• 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 FundsFund Flow Statement

The following rules may be applied to current assets and current

liabilities for preparing this statement:

An increase in current assets, increases working capital

A decrease in current assets, decreases working capital

An increase in current liabilities, decreases working capital

A decrease in current liabilities, increases working capital

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

follows:

Liabilities:

31 March 2006 31 March 2007

Accounts Payable 15,000 20,000

Notes Payable 25,000 10,000

Other 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

FixedAssets 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

Working Capital 70,000 1,05,000

Net increase in Working Capital 35000 35,000

1,05,000 1,05,000 60,000 60,000

Format of Adjusted Profit & Loss Account

Particulars Amount Particulars Amoun

t

To Depreciation By Bal b/d (Balance of P&L a/c at the

end of previous year )

To loss on sale of fixed assets By profit on sale of fixed assets

To loss on sale of long term

investment

By profit on sale of long term

investment

To Preliminary expense written off By refund of tax

To goodwill written off By dividend on investment

To discount on debentures written off By funds from operation

To provision for taxation

To dividend

To proposed dividend

To transfer to general reserve

To transfer to sinking fund

To Bal c/d (Balance of P&L a/c at the

end of current year )

To (Funds lost in operation)

Question

Calculate ‘Funds from operation’ with

the help of following balances extracted

from the books of a Company:

Particulars 2014 2015

Profit & Loss Surplus 4,50,000 4,20,000

General Reserve 1,50,000 1,87,500

Goodwill 75,000 60,000

Provision for

depreciation

30,000 39,000

Preliminary Expenses 22,500 15,000

Particulars Amount Particulars Amount

To general

reserve

37,500 By Bal b/d 4,50,000

To goodwill

written off

15,000 By funds from

Operations

39,000

To Provision for

Dep.

9,000

To preliminary

expenses

written off

7,500

To Bal c/d 4,20,000

4,89,000 4,89,000

Adjusted Profit And Loss Account

Question

Calculate Funds from operation from the following

details:

Rs.

Net profit 2,50,000

Transferred to general reserve 40,000

Old machinery costing Rs. 50,000 was sold for Rs. 20,000

Goodwill appears in the book at Rs. 1,00,000 out of which 10% has

been written off during the year

Depreciation @ 10% has been charged on fixed assets 2,00,000

Preference shares have been redeemed at a premium of 5%. The

amount of premium was Rs. 10,000.

10,000


To loss on sale

of old machine

30,000 By Bal b/d

(funds from

Operations)

3,20,000

To goodwill

written off

10,000

To Dep. On

fixed assets

20,000

To premium on

redemption of

pref. shares

10,000

To Bal c/d 2,50,000

3,20,000 3,20,000


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 ……..

Prepare Funds flow Statement with given details:

Rs.

Issue of shares for cash 5,00,000

Issue of share against the purchase of plant 3,00,000

Borrowings in cash 2,00,000

Sale of furniture on credit 60,000

Debentures redeemed 1,60,000

Profit from operations 1,00,000

Purchase of machine for cash 6,00,000

Closing cash 1,00,000

Sources of

funds

Amount Application of

funds

Amount

Funds from

operations

1,00,000 Debentures

redeemed

1,60,000

Issue of Shares 5,00,000 Purchase of

machine for cash

6,00,000

Borrowings in

cash

2,00,000 Increase in W.C.

(Balancing figure)

40,000

8,00,000 8,00,000

Funds Flow Statement

Prepare a Fund Flow Statement from the following data of ABC Ltd.:

2015 (Rs.) 2014 (Rs.)

Cash 8,344 4,652

Trade Receivables 12,650 18,170

Allowances for bad debts 1,750 1,860

Merchandise/ goods 23,875 24,640

Furniture & Fixtures 17,500 12,000

Truck 19,000 11,500

Accumulated depreciation on truck 4,500 3,000

Trade Payables 22,122 19,280

Capital 50,000 50,000

Retained earnings (+) Profit (-) Loss +2,997 -3,178

A dividend of Rs 5,000 was paid in 2014-15.

Depreciation on furniture & fixtures amounted to Rs 1,200 in 2014-15. It was

created to assets a/c.


Increase Decrease


Cash 4,652 8,344 3,692 ------

Trade Receivables (less

allowances)

16,310 10,900 ------- 5,410

Inventory/ Merchandise 26,640 23,875 ------- 765

45,602 43,119


Trade Payables 19,280 22,122 ------- 2,842

19,280 22,122

Working Capital 26,322 20,997

Net decrease in Working Capital 5,325 5,325

26,322 26,322 9,017 9,017

Statement Of Changes in Working Capital


To Balance b/d

(Loss)

3,178 By Bal b/d (funds

from Operations)

13,875

To dividend 5,000

To Dep. On

furniture

1,200

To Dep. On Truck 1,500

To Bal c/d 2,997

13,875 13,875


Sources of funds Amount Application of

funds

Amount

Funds from

operations

13,875 Purchase of

furniture

6,700

Decrease in

Working Capital

5,325 Purchase of truck 7,500

Payment of

dividend

5,000

19,200 19,200


Note:

Opening balance of furniture 12,000

Less: Depreciation 1,200

10,800

Purchase of furniture (balancing figure) 6,700

Closing balance of furniture 17,500

From the data given below of XY Ltd, prepare a fund flow statement and schedule of

changes in working capital:

Balance Sheet

(as at 31st

March)

Particulars 2014 2015

I. Equity & Liabilities

Shareholders’ funds:

Share Capital 1,00,000 1,25,000

Reserves and Surplus

General Reserve 25,000 30,000

P&L balance 15,250 15,300

Provision for tax 15,000 17,500

Current liabilities

Bank loan 35,000 -

Trade payables 75,000 67,600

2,65,250 2,55,400

II. Asset

Non-Current asset:

Land & Building 1,00,000 95,000

Plant 75,000 84,500

Goodwill - 2,500

Current Assets:

Inventories 50,000 37,000

Trade Receivables 40,000 32,100

Cash in hand 250 300

Cash at bank - 4,000

2,65,250 2,55,400

Additional Information:

Dividend of Rs. 11,000 was paid during

the year 2014-15.

Depreciation charged on plant was Rs.

7,000

Provision for income tax made during

2014-15 was Rs. 16,500


Increase Decrease


Inventories 50,000 37,000 ------- 13,000

Trade Receivables 40,000 32,100 ------- 7,900

Cash in hand 250 300 50 -------

Bank -------- 4,000 4,000 -------

90,250 73,400


Bank loan 35,000 -------- 35,000 -------

Trade Payables 75,000 67,600 7,400 -------

1,10,000 67,600

Working Capital (19,750) 5,800

Net increase in Working Capital 25,550 ------- 25,550

5,800 5,800 46,450 46,450

Statement Of Changes in Working Capital


To General reserve 5,000 By Bal b/d 15,250

To dividend 11,000 By funds from Operations 44,550

To provision for tax 16,500

To Dep. On plant 7,000

To Dep. On Land

& Building

5,000

To Bal c/d 15,300

69,800 69,800


Sources of funds Amount Application of funds Amount

Funds from

operations

44,550 Purchase of plant 16,500

Issue of Share Capital 25,000 Purchase of goodwill 2,500

Dividend paid 11,000

Tax paid 14,000

Increase in Working

capital

25,550

69,550 69,550


Note:

Opening balance of Plant 75,000

Less: Depreciation 7,000

68,000

Purchase of plant (balancing figure) 16,500

Closing balance of plant 84,500

To tax paid 14,000 By Bal c/d 15,000

To Bal c/d 17,500 By P&L

Balance

16,500

31,500 31,500

Provision for Taxation Account

Thank You

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