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Unit 7: Fund Flow Statement

Less: Refund of Tax 6,000 Notes
Profit on Sale of Building 10,000
Dividend Received 10,000
Fund from Operations 96,000

Second Method:

Adjusted Profit & Loss A/c
To Depreciation on Plant 10,000 By Opening Balance b/d 50,000
To Provision for Taxation 8,000 By Profit on Sale of Building 10,000
To Loss on Sale of Plant 4,000 By Dividend Received 10,000
To Discount on issue of debentures 4,000 By Refund of Tax 6,000
To Provision for bad debts 2,000 By Balancing Figure 96,000
To Transfer to general reserve 2,000 Fund from Operations
To Preliminary expenses off 6,000

To Goodwill written off 4,000

To Proposed Dividend 12,000

To Closing Profit c/d 1,20,000

1,72,000 1,72,000

The next step is to prepare the fund flow statement. The proforma of the fund flow statement:
Sources of Funds Uses of Funds
Funds from Business Operation Funds Lost in Operations
Non-trading Incomes Redemption of Preference Share Capital
Sale of Non-current Assets Repayment of Loans
Sale of Long-term Investments Purchase of Long-term Investments
Issue of Shares Purchase of Fixed Assets
Acceptance of Deposits Payment of Taxes
Long-term Borrowings Payment of Dividends
Decrease in Working Capital Drawings
Loss of Cash
Increase in Working Capital

Example: From the following details prepare a statement showing Changes in Working
Capital During 2009.

Balance Sheet of Pioneer Ltd.
as on 31st December
Liabilities 2008 ( ) 2009 ( ) Assets 2008 ( ) 2009 ( )
Share capital 5,00,000 6,00,000 Fixed assets 10,00,000 11,20,000
Reserves 1,50,000 1,80,000 Less: Depreciation 3,70,000 4,60,000
Profit and Loss A/c 40,000 65,000 6,30,000 6,60,000
Debentures 3,00,000 2,50,000 Stock 2,40,000 3,70,000
Creditors for goods 1,70,000 1,60,000 Book Debts 2,50,000 2,30,000
Provision for tax 60,000 80,000 Cash in hand 80,000 60,000
Preliminary expenses 20,000 15,000
12,20,000 13,35,000 12,20,000 13,35,000
(B.Com., Bharathidasan November,1986)

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