Presented by: NIKITA JAIN Assistant Professor Topic :- FUND FLOW STATEMENT B.Com:-2nd Sem, Code:- LNBCO 201 Subject:-Management Accounting
Presented by:
NIKITA JAIN
Assistant Professor
Topic :- FUND FLOW STATEMENT
B.Com:-2nd Sem, Code:- LNBCO 201
Subject:-Management Accounting
Fund Flow Statement
Fund flow statement is –
a statement shows the changes in funds
b/w two balance sheet of two different dates.
Fund Flow Statement
1) The Funds flow statement contain all the details
of the financial resources which have became
available during an accounting period.
2) This statement discloses the amounts raised from
various sources of finance during a period.
3) It explains that how finance has been used in the
business.
4) It is a very useful tool in analysis of financial
statements which analyses the changes taking
place between two balance sheet dates.
Advantages Of Fund Flow Statement
•Shows Changes in The Financial Position
of the Company
Reason for Changes in
the Financial Position between Two
Accounting Periods
Level of Working Capital Adequacy
Future Business and Budget Projections
Company Image
• Increase in Working Capital
• Decrease in working Capital
Statement of Changes in
Working Capital
• Funds from Operation (Profit)
• Funds lost in operation (Loss)Adjusted Profit
& Loss A/c
• Sources of Funds
• Application of FundsFund Flow Statement
The following rules may be applied to current assets and current
liabilities for preparing this statement:
An increase in current assets, increases working capital
A decrease in current assets, decreases working capital
An increase in current liabilities, decreases working capital
A decrease in current liabilities, increases working capital
Example:- The Balance Sheet of ABC Ltd. at the end of 2006 and 2007 are as
follows:
Liabilities:
31 March 2006 31 March 2007
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
FixedAssets 1,00,000 1,40,000
Accumulated Depreciation (-)40,000 (-)55,000
TOTAL 1,80,000 2,35,000
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
Working Capital 70,000 1,05,000
Net increase in Working Capital 35000 35,000
1,05,000 1,05,000 60,000 60,000
Format of Adjusted Profit & Loss Account
Particulars Amount Particulars Amoun
t
To Depreciation By Bal b/d (Balance of P&L a/c at the
end of previous year )
To loss on sale of fixed assets By profit on sale of fixed assets
To loss on sale of long term
investment
By profit on sale of long term
investment
To Preliminary expense written off By refund of tax
To goodwill written off By dividend on investment
To discount on debentures written off By funds from operation
To provision for taxation
To dividend
To proposed dividend
To transfer to general reserve
To transfer to sinking fund
To Bal c/d (Balance of P&L a/c at the
end of current year )
To (Funds lost in operation)
Question
Calculate ‘Funds from operation’ with
the help of following balances extracted
from the books of a Company:
Particulars 2014 2015
Profit & Loss Surplus 4,50,000 4,20,000
General Reserve 1,50,000 1,87,500
Goodwill 75,000 60,000
Provision for
depreciation
30,000 39,000
Preliminary Expenses 22,500 15,000
Particulars Amount Particulars Amount
To general
reserve
37,500 By Bal b/d 4,50,000
To goodwill
written off
15,000 By funds from
Operations
39,000
To Provision for
Dep.
9,000
To preliminary
expenses
written off
7,500
To Bal c/d 4,20,000
4,89,000 4,89,000
Adjusted Profit And Loss Account
Question
Calculate Funds from operation from the following
details:
Rs.
Net profit 2,50,000
Transferred to general reserve 40,000
Old machinery costing Rs. 50,000 was sold for Rs. 20,000
Goodwill appears in the book at Rs. 1,00,000 out of which 10% has
been written off during the year
Depreciation @ 10% has been charged on fixed assets 2,00,000
Preference shares have been redeemed at a premium of 5%. The
amount of premium was Rs. 10,000.
10,000
Particulars Amount Particulars Amount
To loss on sale
of old machine
30,000 By Bal b/d
(funds from
Operations)
3,20,000
To goodwill
written off
10,000
To Dep. On
fixed assets
20,000
To premium on
redemption of
pref. shares
10,000
To Bal c/d 2,50,000
3,20,000 3,20,000
Adjusted Profit And Loss Account
Format of Fund Flow StatementFund 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 ……..
Prepare Funds flow Statement with given details:
Rs.
Issue of shares for cash 5,00,000
Issue of share against the purchase of plant 3,00,000
Borrowings in cash 2,00,000
Sale of furniture on credit 60,000
Debentures redeemed 1,60,000
Profit from operations 1,00,000
Purchase of machine for cash 6,00,000
Closing cash 1,00,000
Sources of
funds
Amount Application of
funds
Amount
Funds from
operations
1,00,000 Debentures
redeemed
1,60,000
Issue of Shares 5,00,000 Purchase of
machine for cash
6,00,000
Borrowings in
cash
2,00,000 Increase in W.C.
(Balancing figure)
40,000
8,00,000 8,00,000
Funds Flow Statement
Prepare a Fund Flow Statement from the following data of ABC Ltd.:
2015 (Rs.) 2014 (Rs.)
Cash 8,344 4,652
Trade Receivables 12,650 18,170
Allowances for bad debts 1,750 1,860
Merchandise/ goods 23,875 24,640
Furniture & Fixtures 17,500 12,000
Truck 19,000 11,500
Accumulated depreciation on truck 4,500 3,000
Trade Payables 22,122 19,280
Capital 50,000 50,000
Retained earnings (+) Profit (-) Loss +2,997 -3,178
A dividend of Rs 5,000 was paid in 2014-15.
Depreciation on furniture & fixtures amounted to Rs 1,200 in 2014-15. It was
created to assets a/c.
Particular 2014 2015 Effect on Working Capital
Increase Decrease
Current Assets: Rs. Rs. Rs. Rs.
Cash 4,652 8,344 3,692 ------
Trade Receivables (less
allowances)
16,310 10,900 ------- 5,410
Inventory/ Merchandise 26,640 23,875 ------- 765
45,602 43,119
Current Liabilities:
Trade Payables 19,280 22,122 ------- 2,842
19,280 22,122
Working Capital 26,322 20,997
Net decrease in Working Capital 5,325 5,325
26,322 26,322 9,017 9,017
Statement Of Changes in Working Capital
Particulars Amount Particulars Amount
To Balance b/d
(Loss)
3,178 By Bal b/d (funds
from Operations)
13,875
To dividend 5,000
To Dep. On
furniture
1,200
To Dep. On Truck 1,500
To Bal c/d 2,997
13,875 13,875
Adjusted Profit And Loss Account
Sources of funds Amount Application of
funds
Amount
Funds from
operations
13,875 Purchase of
furniture
6,700
Decrease in
Working Capital
5,325 Purchase of truck 7,500
Payment of
dividend
5,000
19,200 19,200
Funds Flow Statement
Note:
Opening balance of furniture 12,000
Less: Depreciation 1,200
10,800
Purchase of furniture (balancing figure) 6,700
Closing balance of furniture 17,500
From the data given below of XY Ltd, prepare a fund flow statement and schedule of
changes in working capital:
Balance Sheet
(as at 31st
March)
Particulars 2014 2015
I. Equity & Liabilities
Shareholders’ funds:
Share Capital 1,00,000 1,25,000
Reserves and Surplus
General Reserve 25,000 30,000
P&L balance 15,250 15,300
Provision for tax 15,000 17,500
Current liabilities
Bank loan 35,000 -
Trade payables 75,000 67,600
2,65,250 2,55,400
II. Asset
Non-Current asset:
Land & Building 1,00,000 95,000
Plant 75,000 84,500
Goodwill - 2,500
Current Assets:
Inventories 50,000 37,000
Trade Receivables 40,000 32,100
Cash in hand 250 300
Cash at bank - 4,000
2,65,250 2,55,400
Additional Information:
Dividend of Rs. 11,000 was paid during
the year 2014-15.
Depreciation charged on plant was Rs.
7,000
Provision for income tax made during
2014-15 was Rs. 16,500
Particular 2014 2015 Effect on Working Capital
Increase Decrease
Current Assets: Rs. Rs. Rs. Rs.
Inventories 50,000 37,000 ------- 13,000
Trade Receivables 40,000 32,100 ------- 7,900
Cash in hand 250 300 50 -------
Bank -------- 4,000 4,000 -------
90,250 73,400
Current Liabilities:
Bank loan 35,000 -------- 35,000 -------
Trade Payables 75,000 67,600 7,400 -------
1,10,000 67,600
Working Capital (19,750) 5,800
Net increase in Working Capital 25,550 ------- 25,550
5,800 5,800 46,450 46,450
Statement Of Changes in Working Capital
Particulars Amount Particulars Amount
To General reserve 5,000 By Bal b/d 15,250
To dividend 11,000 By funds from Operations 44,550
To provision for tax 16,500
To Dep. On plant 7,000
To Dep. On Land
& Building
5,000
To Bal c/d 15,300
69,800 69,800
Adjusted Profit And Loss Account
Sources of funds Amount Application of funds Amount
Funds from
operations
44,550 Purchase of plant 16,500
Issue of Share Capital 25,000 Purchase of goodwill 2,500
Dividend paid 11,000
Tax paid 14,000
Increase in Working
capital
25,550
69,550 69,550
Funds Flow Statement
Note:
Opening balance of Plant 75,000
Less: Depreciation 7,000
68,000
Purchase of plant (balancing figure) 16,500
Closing balance of plant 84,500
To tax paid 14,000 By Bal c/d 15,000
To Bal c/d 17,500 By P&L
Balance
16,500
31,500 31,500
Provision for Taxation Account