Monday, March 24, 2008

Q:- Define fund , fund flow and fund flow statement ? What are the uses , significance , utility and limitation of fund flow statement ?

Ans. Definition of fund

fund simply means availability of cash in daily use

Definition of fund flow

flow of fund is just like circulation of blood . Like circulation of blood , fund flow should come in business and go from business.

flow of fund here means conversation of one asset to be use to purchase of another asset or use to deduction in liabilities .

Definition of fund flow statement

fund flow statement is a statement which shows source and use of fund in particular time. This period may be two years or more years .Basis of making fund flow statement is two years or more than two years balance sheet .

Procedure for preparing fund flow statement

For making fund flow statement , we took three steps

1st step

1 making shedule or statement of change working capital

2nd step

2 making adjusted profit and loss account or statement showing fund from operation or lost in operation

3rd Step

fund flow statement

shedule of changing working capital proforma

particular previous year current year increase working capital decrease in w/c

a b c d

current asst. Rs. 5000 Rs.10000 Rs 5000 ---

current liabilities 4000 5000 1000

Working capital

C.A-C.L. 1000 5000 5000 10000

Net increase in

working capital c-d =5000-1000 =4000

See adjusted profit and loss account in picture of my hand written notes

and see also fund flow statement

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