Download - Fund Flow Statement 1
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FUNDS : WORKING CAPITAL
FLOW OF FUNDS: THE TERM FLOW MEANS CHANGE AND THEREFORE THE TERM FLOW OF FUNDS MEANS CHANGES IN FUNDS OR CHANGES IN WORKING CAPITAL. IN OTHER WORDS, ANY INCREASE OR DECREASE IN WORKING CAPITAL MEANS FLOW OF FUNDS.
- FUNDS FLOW STATEMENT
Funds flow statements is dealt by Accounting Standard 7 .
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Meaning :- It explains changes in funds or changes in working capital . It explains the working capital position of the company which gives an idea to the top management about the liquidity position of the company.
Working capital:- It is the difference between current assets and current liabilities.
Steps in preparation of funds flow statement:-
1. Preparation of working capital statement that explains increase or decrease in working capital.
2. preparation of funds from operation statement in which we find out operating profit.
3. Preparation of funds flow statement that shows various sources and application of fund .
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OBJECTIVES
Analysis of financial operation.
Evaluation of firms financing.
A tool for communication.
Future Guidance.
Comparative study.
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Current assets
Cash in hand and bank
Marketable investments
Accounts receivables
Stock
Prepaid exp.
Fixed assets
Goodwill
Land and building
Plant and machinery
Long term investment
Current liabilities
Bank overdraft
Outstanding expenses
Accounts payable
Fixed liabilities
Share capital
Reserve and surplus
Debentures
Long term loans
Flow in fund
Not flow in funds
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USES OF FUNDS FLOW
WHY THE LIQUID POSITION OF THE BUSINESS BECOMING MORE AND MORE UNBALANCED IN SPITE OF COMPANY IS MAKING MORE AND MORE PROFITS.WHERE HAVE THE PROFIT GONE.WHAT WILL BE THE SOURCES FOR DIVIDEND IF COMPANY IS NOT EARNING SUFFICIENT PROFIT.WHAT ARE THE SOURCES OF REPAYMENT OF THE LOAN TAKEN. HOW MUCH FUNDS GENERATION THROUGH NORMAL BUSINESS OPERATION. - IN WHAT WAY THE MANAGEMENT HAS UTILIZED THE FUNDS IN THE PAST
AND WHAT ARE GOING TO BE LIKELY USES OF FUNDS ?
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Funds flow Analysis
This statement is based on the working Capital concept of funds.
It measures the inflows and outflows of working capital resulting from different transactions.
Funds flow statement measures and presents in an analytical manner the summarized version of the numerous flows of funds for a specific period.
Funds Flow is the change in Working Capital
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SOURCES OF FUNDS
1. Fund from operations.
2. Issue of shares.
3. Issues of debentures.
4. Raising of long term loans.
5. Sale of Fixed Assets.
6. Non trading Receipts.
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Application of funds
Loss from operations.
Redemptions of preference shares.
Redemptions of debentures.
Repayment of Long-Terms Loans.
Purchase of fixed assets.
Non-Trading Payments.
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Non operating expenses.
Depreciation .
Loss on sales of fixed Assets.
Goodwill written off.
Preliminary expenses written off.
Discount on issue of shares.
Dividend paid.
Discount on issue of debentures.
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Non- operating Income
Profit on sales of fixed assets.
Dividend received.
Interest received .
Compensation received.
Refund of taxes.
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Schedule of working capital
If current assets Increase working capital increase.
If current assets decrease working capital decreases.
If current liablities increase, working capital decrease.
If current liablities decrease, working capital increases.
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LIMITATIONS
Historic in Nature.
Not a substitute of Income statement and Balance sheet.
Ignores Non fund transactions.
No reflection of change in cash position.
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Schedule Of Changes In Working Capital
4885.64
4885.6
7186.7
7186.7
TOTAL
3005
Increase In Working Capital
3005
7186.7
4181.9
CA - CL
8170.7
6290.1
Total
44.85
4522.2
4477.4
Bills for collections
645.02
1881
1236
Short term borrowings
1190.75
1767.5
576.72
Other liabilities
Current liabilities
15357
10472
Total
1220.6
1522.9
302.3
Bills receivables
3139.9
9836.5
6696.6
Loans & adv.
486.95
3404.4
2917.5
Investments
38.25
593.61
555.36
Cash & bank bal.
Decrease
Increase
2005
2004
Current assets
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CALCULATION OF FUNDS FROM OPERATION
220.07
FUNDS FROM OPERATION
321.03
OPENING BAL. OF P&L A/C
NIL
(-) NON FUND CR.
541.1
197.79
195.23
Transfer Of R/S
2.56
Depreciation On Fixed Assets
(+) Non Fund Items
343.31
Closing Balance Of P&L A/c
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Funds Flow Statement
3491.02
3491.02
TOTAL
966.37
BORROWINGS
2253.02
LONG TERM LOANS
2.56
SALE OF FIXED ASSET
486
Investments
220.07
FUNDS FROM OPERATION
3005.02
Increase In WC
49
ISSUE OF CAPITAL
AMT.
APPLICATION
AMT.
SOURCES
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How Cash Flow Differ From funds Flow ?
Unlike funds flow Cash Flow does not has non-cash items.
It comprises only those entries in which cash has come in or gone out.
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PROBLEM -1
From the following Balance Sheets of Roshan Corporation Ltd. for the year ended on March 31, 2002 and 2003 as also the additional information, you are required to prepare(a) A schedule of changes in working capital.
(b) A funds from operation.
(c) A funds flow statement:
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BALANCE SHEET
LIABILITIES2002Rs.2003Rs.ASSETS2002Rs.2003Rs.Share Capital10% DebentureReserves and surplusAccount PayableProvision for Depreciation500000300000150000250000200000600000200000200000150000250000BankAccount ReceivableStockPlant and machinery1500005000002000005500001000004000003000006000001400000140000014000001400000
as on 31st March -
Additional information:
(a). A machine of original cost of Rs.200000
with accumulated depreciation of 150000 was sold for Rs 100000.
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FUNDS FLOW STATEMENT
Funds flow statements is dealt by Accounting Standard 7 .
.
Meaning
:- It explains changes in funds or changes in working capital
. It explains the working capital position of the company which gives
an idea to the top management about the liquidity position of the
company.
Working capital
:- It is the difference between current assets and
current liabilities.
Steps in preparation of funds flow statement:-
1.
Preparation of working capital statement that explains increase or
decrease in working capital.
2.
preparation of funds from operation statement in which we find
out operating profit.
3. Preparation of funds flow statement that shows various sources
and application of fund .