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What is Fund Flow Statement and its format?


Fund flow Statement: It is a statement which shows source of funds and application of funds in a company. With the help of it, the investors know how the company raise its capital and how it uses that fund to increase investors return. It is prepared with the help of previous year and current year balance sheet.
It also helps to know the changes in working capital and financial position of a company. So, that the company takes appropriate action if the changes affect the company’s earnings. It acts as a tool of financial statement analysis.

Importance of fund flow statement:

·         With the help of it company can find out how the funds are used in a company and helps to control if there is any wastage of funds to increase company’s earnings.
·         Helps to make a financial planning to meet the company’s goal.
·         It shows how efficiently uses its working capital to increase its financial position.

Limitations:
·         It does not show the inflow and outflow of cash a company.
·         It is prepared on the basis of historical data. So, it does not act as a tool for forecasting future events.
·         It is prepared on the basis of balance sheet and profit and loss a/c.

Fund flow statement format:

Source of funds
Application of funds
Issue of share capital
Payment of fixed assets
Debenture
Payment of borrowings
Long term borrowing
Payment of tax
Sale of fixed assets
Payment of dividend
*Fund from business operation
*Loss from business operation
*Decrease in working capital
*Increase in working capital


*Changes in working capital:

Particulars
Previous year
Current year
Increase in working capital
Decrease in working capital
Current assets:
Debtors
-----
-----
Stock
-----
-----
Prepaid expenses
-----
-----
Accrued income
-----
-----
Cash
-----
-----
Cash at bank
-----
-----
Total
------
------
Less: Current liabilities:
Creditors
-----
-----
Bills payable
-----
-----
Outstanding expenses
-----
-----
Bank overdraft
-----
-----
Dividend payable
------
-----
Tax payable
-----
-----
Income received in advance
------
-----
Provision for doubtful debt
------
-----
Total
------
------
Net increase or decrease in working capital

*Fund from business operation:

Particulars
Amount in Rs.
Amount in Rs.
Net profit /Net profit in appropriation A/c
------
Add: Non-operating expense
Depreciation
-----
Loss on sale of asset
-----
Provision of doubtful debt
-----
Proposed dividend
-----
Interest paid
-----
Provision on tax
-----
Goodwill, trademark, patent written off
-----
Preliminary expense written off
-----
Transfer to reserve
-----
Discount on issue of shares
-----
------
Less: Non- operating income:
Dividend received
-----
Commission received
-----
Profit on sale of asset.
-----
------
Fund from operation
------


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