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    Fund Flow Statement

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    Ramachandran Sridhar
    The document discusses fund flow statements, which compare balance sheets from two periods to analyze changes in working capital. Transactions are classified as sources, applications, or non-impacting. Sources increase current assets or decrease liabilities, while applications do the opposite. Income items are sources and expenses are applications. Profit is a source while loss is an application. Adjustments are made to profit to calculate fund profit from operations by removing non-fund items like depreciation. The statement presents changes in working capital from operating, investing, and financing activities.

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    Fund Flow Statement

    Uploaded by

    Ramachandran Sridhar
    59 views5 pages
    The document discusses fund flow statements, which compare balance sheets from two periods to analyze changes in working capital. Transactions are classified as sources, applications, or non-impacting. Sources increase current assets or decrease liabilities, while applications do the opposite. Income items are sources and expenses are applications. Profit is a source while loss is an application. Adjustments are made to profit to calculate fund profit from operations by removing non-fund items like depreciation. The statement presents changes in working capital from operating, investing, and financing activities.

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    The document discusses fund flow statements, which compare balance sheets from two periods to analyze changes in working capital. Transactions are classified as sources, applications, or non-impacting. Sources increase current assets or decrease liabilities, while applications do the opposite. Income items are sources and expenses are applications. Profit is a source while loss is an application. Adjustments are made to profit to calculate fund profit from operations by removing non-fund items like depreciation. The statement presents changes in working capital from operating, investing, and financing activities.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    59 views5 pages

    Fund Flow Statement

    Uploaded by

    Ramachandran Sridhar
    The document discusses fund flow statements, which compare balance sheets from two periods to analyze changes in working capital. Transactions are classified as sources, applications, or non-impacting. Sources increase current assets or decrease liabilities, while applications do the opposite. Income items are sources and expenses are applications. Profit is a source while loss is an application. Adjustments are made to profit to calculate fund profit from operations by removing non-fund items like depreciation. The statement presents changes in working capital from operating, investing, and financing activities.

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    You are on page 1of 5

    FUND FLOW STATEMENT

    FINANCIAL MANAGEMENT

    DECEMBER 2, 2018
    BY SIDHHI CA
    FINANCIAL MANAGEMENT

    FUND FLOW STATEMENT

    Introduction.
    1. The word fund means working capital.
    2. Working capital =current asset - current liability. it is that portion of current asset
    which is funded by long term funds
    3. Fund flow statement compares balance sheet of two periods and states why
    working capital has increased or decreased
    4. The flows or working capital, changes because of transactions happening in the
    period.
    5. The transactions in a period can be classified into 3 categories
    1. Those transactions that increases fund ( SOURCE)
    2. Those transactions that decreases fund (APPLICATION)
    3. Those transactions that does not affect fund flow.

    6. Let us take a look of this balance sheet,

    LIABILITIES ASSETS
    NON-CURRENT LIABILITY NON-CURRENT ASSETS
    CURRENT LIABLITY CURRENT ASSETS
    7. Fund will not flow, when a transaction is between two current items or two non-
    current items. For the fund to flow it should be between current and non- current
    8. If a transactions increases current assets or decreases current liability, then it is a
    source. if it is vice versa it called application
    9. EXAMPLES
    TRANSACTION JOURNAL IMPACT
    PURCHASE OF F.A (NCA) APPLICATION
    F.A TO BANK(CA)
    F.A F.A (NCA) NO FUND
    PURCHASED TO SHARE FLOW
    FOR SHARES CAPITAL(NCL)
    ISSUE OF BANK (CA) SOURCE
    SHARE TO SHARE
    CAPITAL CAPITAL(NCL)
    CREDITORS CREDITORS (CL) SOURCE
    CONVERTED TO
    INTO DEBENTURES(NCL)
    DEBENTURES

    10. Till now we discussed journal entries which are purely balance sheet items,
    now we will see transactions that are P&L account transactions.

    11. Entry for sales:

    NOTES BY SIDDHI CA
    FINANCIAL MANAGEMENT

    1. Debtors
    To sales

    2. Sales
    To P&L

    3. Debtors (CA)
    To P&L (NCA)
    This is a fund flow, because it is between current and non -current item. It is a source
    because current assets increases

    12. ENTRY FOR SALARIES PAID.


    1. SALARY
    TO BANK
    2. P&L
    TO SALARY

    3. P&L (NCL)
    TO BANK (CA)
    Once again fund flows which is an APPLICATION

    13. The above discussion can be generalized and we can say that INCOMES ARE
    SOURCES and EXPENSES ARE APPLICATION. Therefore PROFIT IS SOURCE
    and LOSS IS APPLICATION.
    14. Inside profit there may be some income and expenses which may not result
    in fund flow example, depreciation, goodwill written off, profit or loss on sale
    of asset etc…
    15. These should be taken out to call the profit as fund profit.
    16. FUND--PROFIT

    Fund profit

    Fund profit from non-


    Fund profit from operating activities (
    operating activities Investment and
    financing)

    Shown as fund
    from operation in Shown separately
    FFS as source or
    application in FFS

    Eg: Dividend
    received , Intrest
    paid etc..

    NOTES BY SIDDHI CA
    FINANCIAL MANAGEMENT

    Simple format:
    Profit xxx
    Add/less Non fund items xxx
    Add/less Non-operating xxx
    Fund flow from operations xxx

    17. Profit or loss on sale of depreciable asset , should be transferred to P&L A/c
    18. Profit on sale of non- depreciable asset like land, should be transferred to
    CAPITAL RESERVE A/c.
    19. Investments can be classified into two types

    Dividend is treated as operating


    Trade Are made in related business to
    income and forms part of fund
    investments promote the current business
    from operation

    Investments
    Dividend is treated as non
    Surplus fund invested with an operating income and hence
    Non trade
    intention to earn investment should be reduced from profit
    investment
    income while calculating FFO and
    shown separately as FFS

    20. Investment income can be classified into two types

    INVESTMENT
    INCOME

    PRE- POST
    ACQUISITION ACQUISITION

    CREDITED TO CREDITED TO
    INVESTMENT A/c P&L A/c

    NOTES BY SIDDHI CA
    FINANCIAL MANAGEMENT

    NOTES BY SIDDHI CA

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