The document defines key terms related to funds and cash flow statements. It explains that a funds flow statement shows how working capital is raised and used during an accounting period, while a cash flow statement reports cash inflows and outflows classified by operating, investing and financing activities. The objectives of both statements are to show how financial resources are obtained and used, assess the working capital position, and evaluate an organization's ability to generate cash flows.

2. WHAT DO YOU MEAN BY THE TERM FUNDS?
Funds means all financial resources used in the
business, whether in the form of men, material,
machinery, money and others. It refers to the money
values in whatever form it may exist. The funds flow
statement is a report on the movement of funds. It
explains how working capital is raised and used during
an accounting period.

3. WHAT DO YOU MEAN BY FUND FLOW
STATEMENT?
The funds flow statement is a report on the
movement of funds or working capital. It explains how
working capital is raised and used during an
accounting period.

4. STATE THE OBJECTIVES OF FUND FLOW STATEMENT.
The main objectives of fund flow statement are:
To show how the resources have been obtained and used.
To indicate the results of current financial management.
To throw light upon the most important changes that have
taken place during a specific period.
To show how the general expansion of the business has
been financed.
To indicate the relationship between profits from
operations, distribution of dividend and raising of new
capital or term loans.
To have an assessment of the working capital position of
the concern.

5. Principle for preparation of working capital statement.
Increase in Current Asset - Increase in Working
Capital
Decrease in Current Asset - Decrease in Working
Capital
Increase in Current liabilities - Decrease in Working
Capital
Decrease in Current liabilities - Increase in Working
Capital
Increase in working capital will appear on the
‘application’ side of funds flow statement.
Decrease in working capital will appear on the
‘source’ side of the funds flow statement.

6. WHAT IS MEANT BY WORKING CAPITAL?
Working capital refers to the capital required for
the day-to-day operations of a business. It is the excess
of current assets over current liabilities. Adequate
working capital is necessary for the successful running
of any organization. The management must forecast
the working capital requirement in advance and
arrange for financing them.

7. WHAT DO YOU MEAN BY CASH FLOW STATEMENT?
Cash flow statement reports the inflows and outflows of
cash and its equivalents of an organization during a particular
period. It reports the cash receipts and cash payments classified
according to the firms major activities-operating, investing and
financing. It shows the net cash inflow and net cash outflow for
each activity and for the overall business of the firm. It reports
from where cash has come and how it has been utilized. It
explains the causes for the change in the cash balance by
reconciling the opening balance of the period with the closing
balance.

8. STATE THE OBJECTIVES OF CASH FLOW
STATEMENT.
It provides information about the cash flow of an
enterprise to users of financial statement which
can be used as a basis to assess the ability of the
enterprise to generate cash and cash equivalents
and the needs of the enterprise to utilize those cash
flows.
To enable the users of financial statement to
evaluate the ‘timing and certainty’ of the
generation of cash flows.
To classify the cash flows on the basis of
operating, investing and financing activities.