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Unit 5: Fund Flow Statement
          Sukhpreet  Kaur, Lovely Professional University



                              Unit 5: Fund Flow Statement                                       Notes


             CONTENTS

             Objectives
             Introduction
             5.1   Meaning of Fund Flow Statement
             5.2   Preparation of Statement of Changes in Working Capital
             5.3   Preparing Funds from Operations

                 5.3.1  Net Profi t Method
                 5.3.2  Sales Method
             5.4   Preparing Fund Flow Statement
             5.5  Summary

             5.6  Keywords
             5.7  Review Questions
             5.8  Further Readings

          Objectives

          After studying this unit, you will be able to:

               Explain the meaning of fund fl ow statement
               Prepare the statement of changes in working capital
               Construct fund fl ow statement

          Introduction

          Every business establishment usually prepares the balance sheet at the end of the fi scal year

          which highlights the financial position of the yester years It is subject to change in the volume

          of the business not only illustrates the financial structure but also expresses the value of the
          applications in the liabilities side and assets side respectively. Normally, Balance sheet reveals
          the status of the firm only at the end of the year, not at the beginning of the year. It never discloses

          the changes in between the value position of the firm at two different time periods/dates.

          The method of portraying the changes on the volume of financial position is the analysis of fund

          fl ow statement.
          5.1 Meaning of Fund Flow Statement

          In a narrow sense, the term fund means cash, and the fund flow statement depicts the cash

          receipts and cash disbursements/payments. It highlights the changes in the cash receipts and
          payments as a cash flow statement in addition to the cash balances i.e. opening cash balance and

          closing cash balance. Contrary to the earlier, the fund means working capital, i.e. the differences
          between the current assets and current liabilities.

          The term flow denotes the change. Flow of funds means the change in funds or in working capital.
          The change on the working capital leads to the net changes taken place on the working capital,




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