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Fund Flow Statement

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Fund Flow Statement
FUNDS FLOW STATEMENT Meaning
The term “Flow” means change and therefore, the term “Flow of Funds” means “Change in Funds” or “Change in Working Capital “. In other works, any increase or decrease in working capital means “Flow of Funds”.
There are two concepts of working capital – gross concept and net concept. • Gross working capital refers to the firm’s investment in current assets • Net working capital means excess of current assets over current liabilities. In business several transactions take place. Some of these transactions increase the funds while others decrease the funds. Some may not make any change in the funds position. In case a transaction results in increase in funds, it will be termed as “source of funds”.
Eg. 1. Issue of shares inflow of funds source of fund 2. Purchase of assets leads to outgo of funds application of funds According to the International Accounting Standard 7, the term ‘Fund’ refers to cash, to cash and cash equivalent, or to working capital. The term ‘flow’ refers to change and therefore the term ‘Funds flow” refers to ‘change in funds’ or ‘change in working capital’. In other words, any increase or decrease in working capital means ‘flow of funds’.
Working capital = Current Assets – Current Liabilities

| | |
|CURRENT ASSETS |CURRENT LIABILITIES |
| | |
| | |
|Cash and bank balances |Accounts payable |
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