Page 216 - DMGT104_FINANCIAL_ACCOUNTING

Financial Accounting

Notes being published with the financial statements. For example, the sale of XY Co. Ltd for the
last five years is as follows:

Years 2000 2001 2002 2003 2004
Sales (000) 500 650 700 800 1,000

These figures may be represented graphically as follows:

(000) 1,000
900
Sales in 800
700
600
500

2000 2001 2002 2003 2004 2005
Years
The sale of the company is represented on the diagram as follows:

Sales

Sales in Rs. (000) 1000 500 650 700 800 1000 Sales
1500

500
0
1 2 3 4 5
Year

Fund Flow Analysis

Fund flow analysis has become very popular technique to analyze the financial statements. Fund
flow statement does not reveal the financial position of the business like the financial statement
but it reveals the changes in the working capital in two periods. Working capital is the life blood
of the business. This statement also gives the information regarding the sources and application of
fund (working capital). Sources of fund are profit from operation, issue of capital loans, sale of
fixed assets, etc., while the application of fund are the purchase of fixed assets, redemption of
capital, payment of dividend purchase of investment, etc.

Cash Flow Analysis

Cash flow analysis is also similar to fund flow analysis. Now it is being prepared by the
companies along with the balance sheet and profit & loss account. It is prepared as per Accounting
Standard-3 of the Institute of Chartered Accountant of India. The fund flow statement reveals the
changes in the fund/working capital while the cash flow statement reveals the changes in the
cash during two periods. It also gives the information regarding the sources of cash and uses of
cash during a period.

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