Preparation of fund flow statement

Mohan Manohar January 31, 2012
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However, the technique of cash flow statement when used in conjunction with ratio analysis serves as barometer in measuring the profitability and financial position of the business.


Preparation of fund flow statement

The preparation of fund flow statement has the following steps-

A) Schedule of changes in working capital-

B) FUND flow Statement

A) Schedule of hanges in Working Capital

It can be prepared by comparing the current assets and current liability of two periods.


As On

As On



Cash Balance

Bank Balance

Marketable securities

Accounts receivables

Accounts receivables


Prepaid expenses


Bank overdraft

Outstanding expenses

Account payable

Net increase/ decrease in Working Capital

Rules for preparing the schedule-

i) An increase in current assets results in increase in working cpital.

ii) Decrease in current assets result in decrease in working capital

iii) Increase in a current liability results in decrease of working capital.

iv) Decrease in a current liabilities results in increase in working capital.


Source of Funds:

Issue of shares

Issue of debenture

Long term borrowing

Sale of fixed assets

Operating profits

Total sources

Application of Funds-

Redemption of redeemable preference shares

Redemption of debentures

Payment of other long term loans

Purchase of Fixed Assets

Operating Loss

Payment of Dividends, Tax etc

Total uses


Net increase/ Decrease in working capital

( Total Sources – Total Uses)


Category: Accounting
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Mohan Manohar

Mohan Manohar is a blogger from India who founded Ittech back in 2007. He is passionate about all things tech and knows the Internet and computers like the back of his hand.

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