What is Fund Flow Statement?
Fund flow statement is a statement that compares the two balance sheets by analyzing the sources of funds (debt and equity capital) and the application of funds (assets) and its reasons for any differences. It helps the company see through where their money has been spent and from where they have received the money (long-term funds raised by issues of shares, debentures, and sale of non-current assets).
Now, we will look at the format of fund flow statement.
Fund Flow Statement Example
It has three separate statements –
- Statement showing changes in working capital.
- Funds from operations.
- Statement of fund flow.
So, we will start with the first one.
#1 – Statement showing changes in working capital
In this statement, you need to effect the changes in working capital. Working capital equals current assets minus current liabilities. We will see the format and example of how it is done.
Statement showing changes in working capital
|Particulars||31.03.2015 (in US $)||31.03.2016 (in US $)||Increase (in US $)||Decrease (in US $)|
|Current Assets –|
|Cash & Bank||65,000||80,000||15,000||–|
|Total Current Assets (A)||354,000||348,000|
|Current Liabilities –|
|Total Current Liabilities (B)||86,000||97,000|
|Net Working Capital (A – B)||268,000||251,000|
|Net Decrease in Working Capital||–||17,000||17,000||–|
#2 – Statement showing funds from operations
In this type of fund flow statement, we will take into account the current year’s profit/loss and then do some adjustments (adding back depreciation, loss on sales of fixed assets, etc.) and then deduct the profit/loss of the previous year.
Let’s have a look –
Statement showing funds from operations
|Funds from operations||Amount (in US$)||Amount (in US$)|
|Profit & Loss A/C as on 31.03.2016||250,000|
|Depreciation on Plant||13,000|
|Depreciation on Buildings||11,000|
|Preliminary expenses are written off||5,000|
|Loss on the sale of fixed assets||4,000|
|Amount transferred to Reserve||17,000|
|Provision for income tax||32,000|
|Less: Profit & Loss A/C as on 31.03.2015||(150,000)|
|Funds from Operations||198,000|
This statement can be alternatively prepared as “Adjusted Profit & Loss A/C” where you can take all the working notes into account.
Now, let’s talk about the next statement.
#3 – Statement of Fund Flow
This is the final statement of the entire fund flow.
And we will take the above statements into account to see the effect in this statement. One thing you need to keep in mind is that when the uses of funds would be deducted from the sources, it should match the net increase/decrease in working capital.
Let’s get started.
Statement of Fund Flow at the year ended 31st March 2016
|Particulars||Amount (in US$)||Amount (in US$)|
|Sources of Funds|
|Funds from operation (ref: the second statement)||198,000|
|Sale of Fixed Assets||50,000|
|Issue of new shares for preference shareholders||100,000|
|Total Sources (A)||348,000|
|Applications of Funds|
|Purchase of Plant||108,000|
|Purchase of Buildings||42,000|
|Payment of taxes||100,000|
|Payment of dividend||65,000|
|Redemption of Preference Shares||50,000|
|Total Application (B)||365,000|
|Net Decrease in Working Capital (A – B)||17,000|
Fund Flow Statement Video
This has been a guide to the Fund Flow statement and its meaning. Here we discuss the fund flow statement along with practical examples with explanation. You may also have a look at the following articles to learn more about accounting –