The document discusses what a fund flow statement is and how to prepare one. A fund flow statement shows changes in a company's working capital between two balance sheet dates by tracing the sources and uses of funds. It is prepared by analyzing changes in current assets and current liabilities, and adjustments such as funds from operations. The statement lists sources of funds like profits and financing activities, and uses of funds like purchases of assets and debt repayments. The objective is to analyze why a company's working capital increased or decreased over a period.

1. Prepared by:
Anjali Jindal
Amit Kaur
Aishwarya Mehta
Amandeep Singh
Anu Aggarwal

2. What Is Fund
 ‘Funds’ refers to money values in whatever form it may
exist. Means all financial resources used in business
whether in the form of men, material, money,
machinery, methods etc.
 The term ‘funds’ means working capital
Working Capital = Current Asset – Current Liability

3. Fund Flow Statement
 Fund Flow Statement Fund flow statement is –
 A statement shows the changes in funds
between two balance sheet of two different
dates.
 A statement to trace the movement of working
capital in the company.

4. Preparation of Fund Flow Statement
 Statement of changes in working capital (before
taking into consideration any adjustments).
 “Funds from Operations” or “Operating Profits on
accrual basis”
 Prepare Funds Flow statement.

5. Rules For Preparing The Statement Of
Changes In Working Capital
 Increase in current asset, results in increase (+) in
working capital.
 Decrease in current asset, results in decreases (-) in
working capital.
 Increase in a current liability, results in decrease (-) in
working capital.
 Decrease in a current liability, results in increase (+) in
working capital.

6. Funds from Operations
Funds from operations refer to those funds which are
generated in the business as a result of carrying out the
operations during the normal course of the business and
are computed by taking out the difference between the
operating revenues that provided funds during the
accounting period and operating expenses that involved an
outflow of funds during the accounting period.

7. Preparing Fund Flow Statement
Sources of Funds Application of Funds
 Funds from operations(w.n.)
 Issue of shares for Current assets
 Issue of debentures for current
assets
 Raising of loans and overdrafts
 Sale of fixed assets
 Interest received and dividend
received
 Sale of Investments
 Net Decrease in Working Capital
(as calculated from schedule)
 Redemption of shares
 Redemption of Debentures
 Repayment of loan and bank
overdraft
 Purchase of Fixed assets
 Interest paid
 Dividends paid(PY)
 Interim dividend paid
 Payment of tax(PY)
 Purchase of investments
 Net Increase in Working Capital
(as calculated from schedule)

8. Objectives of Funds Flow Statement
The Basic objective of funds flow statement is to
indicate the sources from which the funds (i.e.,
working capital) were obtained and the specific uses to
which such funds (i.e., working capital ) were applied
between the dates of two balance sheets.

9. Uses of Funds Flow Statement
As a tool of historical analysis, it provides an answer to some
of the important financial questions such as:
• Why dividends are not paid though company earned higher
profits than previous year.
• Why has the net working capital decreased although the net
income for the period has gone up.
• Why did the firm resort to long-term borrowings inspite of
large profits.
• Why did the firm issue new equit or preference shares

10. Limitations of Funds Flow statement
• Ignores the Non-Fund Transaction
• Secondary Data Based Statement
• Historical Statement