A study on financial report analysis

CHAPTER - II

Fund flow statement

Or
Analysis

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 A study on financial report analysis

 Fund flow statement

Fund flow statement is a statement which
indicates various means by which the funds have been obtained
during a certain period and the ways to which these funds have been
used during that period. The term funds used here means working
capital i.e excess of current assets over current liabilities.

 Importance of Fund flow statement

 Fund flow statement determines the financial consequence of
business operation it shows how the funds were obtained & used in
the past financial manager can take corrective actions.
 The management can formulate its financial policies –
dividend ,reserve etc. on the basis of the statement.
 The statement points out the sound & weak financial position of the
enterprise .
 The statement point out the causes for changes in working capital.
 The management can rearrange the firms financing more effectively
on the basis of the statement.
 This statement lacks originately because it is only rearrangement of
data appearing in account books.

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 A study on financial report analysis

 Limitations of Fund flow statement

 This statement indicates only the past position and not future.
 When both the aspects or a transaction are current , they are not
considered.
 When both the aspects or a transaction are non current , even then
they are not included in this statement.
 This statement is not on deal tool for financial analysis.

 Following accounts and statements are

opened`
1. Statement of change in working capital.
2. Adjusted profit & loss A/c.
3. Fund flow statement.
4. Working accounts.

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 A study on financial report analysis

Statement of change in working capital

Assets Last Current Effect on working

year year capital
/liabilities
Increase Decrease
A)Current assets

Cash in hand
XXX XXX
Cash at bank
XXX XXX
Sundry debtors
XXX XXX
Bills receivable
XXX XXX
Closing stock
XXX XXX
Temporary
XXX XXX
investment

XXX XXX
Out standing inome
XXX XXX
Prepaid expenses
XXX XXX
Advance paid
XXX XXX
Unexpired expenses

Total of Current XXX XXX

Assets(A)

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B)Current liabilities
XXX XXX
Creditors
XXX XXX
Bills payable
XXX XXX
Provision of stock
XXX XXX
Outstanding expenses
XXX XXX
Unpaid expenses
XXX XXX
Advance received
XXX XXX
income
Provision of doubtfull

Total current XXX XXX

liabilities (B)

Working capital (A- XXX XXX

B)

Increase / Decrease in
working capital XXXX XXXX
XXXX XXXX

NOTE:

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 Any assets increase effect on working capital increase .

 Any assets decrease effect on working capital decrease .
 Any liabilities increase effect on working capital decrease.
 Any liabilities decrease effect on working capital increase.

Particulars Amount Particulars amount

To Depreciation onAssets XXX By Opening balance XXX

To Written off preliminary XXX By Dividend received XXX
exp. By Excess provision return XXX
To Write off discount on XXX back
shares By Profit on sale of fixed XXX
To Write off discount on XXX assets
debentures By Trading profit /operating
To Written off good will XXX profit XXX
To Premium on redemption XXX
To Transfer to general reserve XXX
To Loss on sale of fixed asset XXX
To Proposed dividend XXX
(current year)
To Tax provision XXX
To closing balance XXXX

XXXX XXXX

Adjusted profit & loss account

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Sources Amount Application/ Uses Amount

Issue of share XXX Redemption on pref. XXX

Capital shares
XXX XXX
Issue of Debenture Redemption on Debenture
XXX XXX
Long term loan Re- Payment of loan
taken XXX XXX
Purchase of Fixed Assets
Sale of Fixed Assets XXX XXX
Increase in Working
Operating Profit XXX Capital XXX

Decrease in Working XXXX Proposed Dividend ( last

capital year)
XXXX XXXX

FUND FLOW STATEMENT

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Working Accounts: Fixed Assets A/c

Particulars Amt. Particulars Amt.
To Opening Bal. XXX By Bank ( Sold) XXX

To Adj. Profit & Loss XXX By Adj. Profit & loss A/c. XXX
A/c
(Depreciation on Assets)
(Profit on sale of fixed
Assets) XXX By Adj. Profit & loss A/c.(loss on sale of XXX
Assets)
To Bank ( Purchase) XXX
By Closing Balance

XXXX XXXX

Open Account for Liabilities Side :- For Ex Provision

for Taxation A/c
Particulars Amt. Particulars Amt.

To Bank ( XXX By opening Bal. XXX

Tax Paid)
XXX By Adj. Profit & loss A/c ( provision XXX
To
Closing for Current Year)
Bal.

XXXX XXXX

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