Funds flow
A funds flow statement is a consolidated statement of all the cross transactions over
the period for which the flow is being analysed.
Cross Transactions i.e. transactions involving a current account and a non-current
account bring about a change in the fund or working capital. Some bring about an
increase in fund and others bring about a decrease in the available fund (working
capital).
The cross transactions presented in the funds flow statement are classified/grouped
into two as,
i. Sources/Inflows of funds
Transactions which bring about an increase in the available fund (working
capital)
ii. Applications/Outflows of funds
Transactions which bring about a decrease in the available fund (working
capital)
Preparing Funds Flow Statement: Steps, Rules and Format
Read this article to learn about the steps, rules and format required for preparing
funds flow statement with schedule of changes in working capital.
Steps for Preparing Funds Flow Statement:
The steps involved in preparing the statement are as follows:
1. Determine the change (increase or decrease) in working capital.
2. Determine the adjustments account to be made to net income.
3. For each non-current account on the balance sheet, establish the increase or
decrease in that account. Analyze the change to decide whether it is a source
(increase) or use (decrease) of working capital.
4. Be sure the total of all sources including those from operations minus the total
of all uses equals the change found in working capital in Step 1.
General Rules for Preparing Funds Flow Statement:
The following general rules should be observed while preparing funds flow
statement:
A funds flow statement is a consolidated statement of all the cross transactions over
the period for which the flow is being analysed.
Cross Transactions i.e. transactions involving a current account and a non-current
account bring about a change in the fund or working capital. Some bring about an
increase in fund and others bring about a decrease in the available fund (working
capital).
The cross transactions presented in the funds flow statement are classified/grouped
into two as,
i. Sources/Inflows of funds
Transactions which bring about an increase in the available fund (working
capital)
ii. Applications/Outflows of funds
Transactions which bring about a decrease in the available fund (working
capital)
Preparing Funds Flow Statement: Steps, Rules and Format
Read this article to learn about the steps, rules and format required for preparing
funds flow statement with schedule of changes in working capital.
Steps for Preparing Funds Flow Statement:
The steps involved in preparing the statement are as follows:
1. Determine the change (increase or decrease) in working capital.
2. Determine the adjustments account to be made to net income.
3. For each non-current account on the balance sheet, establish the increase or
decrease in that account. Analyze the change to decide whether it is a source
(increase) or use (decrease) of working capital.
4. Be sure the total of all sources including those from operations minus the total
of all uses equals the change found in working capital in Step 1.
General Rules for Preparing Funds Flow Statement:
The following general rules should be observed while preparing funds flow
statement:
