Fund flow statement

1. FUND FLOW STATEMENT Presented by : Ritesh Kumar Tiwari

2. Fund F und means Working Capital. Working Capital Current Assets Current Liabilities

3. Fund Flow Statement Fund flow statement is – a statement shows the changes in funds b/w two balance sheet of two different dates.

4. Format of Fund Flow Statement Fund Flow Statement (As on…………..) Sources of Funds Amount Application of Funds Amount Issue of share capital ……. Redemption of pref. share …….. Issue of debenture ……. Redemption of debenture …….. Raising of long term loan ……. Payment of long term loan …….. Sales of fixed assets ……. Purchase of fixed assets …….. Interest received ……. Interest paid …….. Dividend received ……. Dividend paid .……. Refund of Taxes ……. Payment of Taxes …….. Decrease in working capital ……. Increase in working capital …….. Fund from operation ……. Fund lost in operation .……. TOTAL …….. TOTAL ……..

5. Importance of Fund Flow Statement Identification & Analysis of changes in working capital Evaluation of firm’s financing Knowing the overall creditworthiness of a  firm A n instrument for allocation of resources

6. Preparation of Fund Flow Statement

7. Example:- The Balance Sheet of ABC Ltd. at the end of 2006 and 2007 are as follows: 31 March 2006 31 March 2007 Liabilities: Accounts Payable 15,000 20,000 Notes Payable 25,000 10,000 Other Current Liabilities 10,000 15,000 6 % Bonds ------ 20,000 Retained Earning 80,000 1,10,000 Mortgage ------ 10,000 Shares 50,000 50,000 TOTAL 1,80,000 2,35,000 Assets: Cash 10,000 5,000 Marketable Security 10,000 ------- Inventory 70,000 1,05,000 Receivables 30,000 40,000 Fixed Assets 1,00,000 1,40,000 Accumulated Depreciation (-)40,000 (-)55,000 TOTAL 1,80,000 2,35,000

8. You are required to prepare a Statement of Changes in Working Capital and Fund Flow Statement. Statement of Changes in Working Capital Particular 2006 2007 Effect on Working Capital Increase Decrease Current Assets: Rs. Rs. Rs. Rs. Cash 10,000 5,000 ----- 5,000 Marketable Security 10,000 ----- ----- 10,000 Inventory 70,000 1,05,000 35,000 ----- Receivable 30,000 40,000 10,000 ----- 1,20,000 1,50,000 Current Liabilities: Accounts Payable 15,000 20,000 ----- 5,000 Notes Payable 25,000 10,000 15,000 ----- Other Current Liabilities 10,000 15,000 ----- 5,000 50,000 45,000 Net Increase in Working Capital(Balance) ----- 35,000 TOTAL 60,000 60,000

9. Adjusted Profit & Loss Account Particular Amount Particular Amount To Depreciation (55,000 – 40,000) 15,000 By Opening Balance of P & L A/c 80,000 To Closing Balance of P & L A/c 1,10,000 By Fund from Operation (Balance) 45,000 1,25,000 1,25,000

10. Fund Flow Statement ( As on 31 march 2007) Sources Amount Application Amount Mortgage 10,000 Purchase of Fixed Assets 40,000 6 % Bonds 20,000 Net Increase in Working Capital 35,000 Funds from Operation 45,000 75,000 75,000

11. Thank You