Preparation of fund flow statement

However, the technique of cash flow statement when used in conjunction with ratio analysis serves as barometer in measuring the profitability and financial position of the business.

 

Preparation of fund flow statement

The preparation of fund flow statement has the following steps-

A) Schedule of changes in working capital-

B) FUND flow Statement

A) Schedule of hanges in Working Capital-

It can be prepared by comparing the current assets and current liability of two periods.

Items	As On	As On	Change
CURRENT ASSETS Cash Balance Bank Balance Marketable securities Accounts receivables Accounts receivables Stock-in-trades Prepaid expenses CURRENT LIABILTY Bank overdraft Outstanding expenses Account payable	Increase	Decrease
Net increase/ decrease in Working Capital

Rules for preparing the schedule-

i) An increase in current assets results in increase in working cpital.

ii) Decrease in current assets result in decrease in working capital

iii) Increase in a current liability results in decrease of working capital.

iv) Decrease in a current liabilities results in increase in working capital.

B) FUND FLOW STATEMENT

Source of Funds: Issue of shares Issue of debenture Long term borrowing Sale of fixed assets Operating profits Total sources Application of Funds- Redemption of redeemable preference shares Redemption of debentures Payment of other long term loans Purchase of Fixed Assets Operating Loss Payment of Dividends, Tax etc Total uses
Net increase/ Decrease in working capital ( Total Sources – Total Uses)