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7/30/2019 Fund flow & cash flow
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STATEMENT SHOWING CHANGES IN FINANACIAL POSITION
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INFLOW- SOURCES OF FUNDS
OUTFLOW- APPLICATION OF FUNDS
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Requirements:
1.Balance sheets of the current &previous years2.Adjustments which are to be incorporated.
Classification of' Assets & liabilities
Preparation of schedules
1.schedule of changes in working capital.to find increase/decrease in working capital
2.Adjusted profit &loss account.
to find Funds from operationsorloss in operations
3. Ledger accounts..to findi)Application of funds,ii)Sources of funds
iii)Transfer of accounts
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ASSETS
1.Current assets:
Stock,debtors,B/R,short -term investments,cash.
2.Non-current assets:
Fixed assets,long terminvestments.
3.Intangible assets:
Goodwill,Patents etc.,
4.Fictious assets:P/L a/c,preliminary exp.,Discount on shares etc.
LIABILITIES
1.Current liabilities:
Creditors,banko/d,B/R, short termloans etc.,
2.Non-current liabilities:
Share capital,Reserves&surplus,Provision etc.,
3.Long term liabilities
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PREPARE THE SCHEDULE WITH FOLLOWING RULE:
INCREASE IN CURRENT ASSETS& DECREASE INCURRENT LIABILITIES
Increases the working capital
DECREASE IN CURRENT ASSESTS&
INCREASE IN CURRENT LIABILITIESDecreases the working capital
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To Opening balance By Bank-sale (S)
To Bank-purchases (A) By Adj.P/L a/c-depreciationTOAdj.P/L a/c-profit onsale By Adj.P/L a/c-loss on sale
-------- --------
To Bank-payment(A) By Opening balance
To Closing balance By Adj.P/L a/c-transfer(T)
By Barrowings(S)
---------- -------
---------- -------
ASSETS A/C
LIABILITIES A/C
BALANCE IN ACCOUNTS Would be sale or purchase or transfer
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To Depreciation- fixed asset a/c
To Loss on sale of fixed assetTo Goodwill written off
To Preliminary expenses
To General reserve
To Dividend paid
To Provision for taxation
To BALANCE c/f---------
---------
By BALANCE b/d
By Profit on sale of fixed assetsBy Dividend,Interestre ceived etc.
By Profit on redemption of shares&debentures
By FUNDS FROM OPERATIONS **-----------
------------
-------------------
**Balancing figure
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CALCULATION OF CASH FROM OPERATIONS
ADJUSTMENTS TO CONVERT FROM ACCRUAL BASIS TO CASH BASIS
FUNDS FROM OPERATIONS-(Adj.P/L a/c ) *****
Working capital changes requiring cash or
Not providing cash:INCREASE IN CURRENT ASSETS &DEREASE IN CURRENT LIABILITIES *****
--------
Working capital changes providing cashOr not requiring cash
DECREASE IN CURRENT ASSETS &
INCREASE IN CURRENT LIABILITIES *****---------*****
*****
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SOURCES FUNDS FROM OPERATION
ISSUE OF SHARES
ISSUE OF DEBENTURES
LONG TERM LOANS
SALE OF FIXED ASSETS &OTHERINVESTMENTS
NON TRADING RECEIPTS
APPLICATION PUCHASE OF FIXED ASSETS
&INVESTMENTS
REDEMPTION OF PREFERENCE
SHARES &DEBENTURES
REPAYMENT OF LONG TERM LOANS PAYMENT OF DIVIDENTS
PAYMENT OF TAXES
LOSS FROM OPERATIONSDECREASE IN WORKING CAPITAL
INCREASE IN ORKINGCAPICAPITAL
If the sources exceeds application, it increases working capital
And vice versa
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DERIVATION OF CASH
OPERATING PROFIT
ISSUE OF SHARES
RENT,INTEREST&DIVIDEND RECEIVED
DECREASE IN Current
ASSET EXCEPT CASH
INCREASE IN ANYCurrent LIABILITY
Decrease in Cashbalance
DISPOSITION OF CASH
OPERATING LOSS
REDEPTION OF SAHRES&DEBENTURES
CASH DIVIDEND PAID INCREASE IN Current ASSET
EXCEPT CASH
DECREASE IN ANY Current
LIABILITY Increase in Cash balance
## difference in CASH BALNACE
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INFLOW OF CASH
Cash from operations
Issue of shares &debentures
Barrowing of L.T. Loans
Sale of fixed assets&investments
Non-trading receipts e.g.
dividend,rent, etc.
DECREASE IN CASH BALANCE
OUTFLOW OF CASH
Loss from operations
Purchase of shares &
debentures
Repayment of LT loans Purchase of fixed assets
&investments
Payment of dividends &
taxes INCREASE IN CASH BALANCE
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INFLOW OF CASH Cash from operations
Issue of shares &debentures
Long term loans &sale of fixed assets,investments
Non trading receipts
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Outflow of cash Loss from operations
Redemption of shares & debentures
Repayment of L.T. loans &purchase of fixed assets
Payment dividend &taxes
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INCREASE/ DECREASE IN CASH BALANCE
Instead of showing increase or decrease in cash balance the statement may start with
Opening balance of cash & reach closing balance of cash through inflows &outflows