Page 149 - DMGT403_ACCOUNTING_FOR_MANAGERS

Accounting for Managers

Notes 7.3 Steps in the Preparation of Fund Flow Statement

1. First and foremost step is to prepare the statement of changes in working capital i.e. to
identify the flow of fund/movement of fund through the detection of changes in the
volume of working capital.
2. Second step is the preparation of Non-current A/c items-Changes in the volume of
Non-current A/cs have to be prepared only in order to quantify the flow fund i.e. either
sources or application of fund.

3. Third step is the preparation Adjusted Profit & Loss A/c, which already elaborately
discussed in the early part of the unit.
4. Last step is the preparation of fund flow statement.

7.4 Schedule of Changes in Working Capital

The ultimate purpose of preparing the schedule of changes in the working capital illustrates the
changes in the volume of net working capital which envisages either sources or application of
fund. The schedule of changes are focused as follows:

Increase in Current Assets Increase in Working Capital

Decrease in Current Assets Decrease in Working Capital

Increase in Current Liabilities Decrease in Working Capital

Decrease in Current Liabilities Increase in Working Capital

Particulars Previous Current Increase in Working Decrease in
Year Year Capital (+) Working Capital (-)
(A) Current Assets:
Cash in Hand
Cash at Bank
Marketable Securities
Bills Receivable
Sundry Debtors
Closing Stock
Prepaid Expenses

(B) Current Liabilities:
Creditors
Bills Payable
Outstanding expenses
Pre received Income
Provision for doubtful
and bad debts
Net Working Capital(A-B)
Increase/Decrease Working
Capital

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