To further highlight the term 'funds', note that there are commentators who view funds as cash or working capital, which represent the excess of current assets over current liabilities. As such, such a statement is a statement of a firm's cash inflows and cash outflows.

Lastly, according to Foulke, a fund flow statement is 'a statement of sources and application of signed to analyze the changes in the financial conditions of a business enterprise between two dates.' ConclusionĪ fund flow statement shows the various means by which funds have been obtained and used in a business over a specific period. Yorston, Smyth, and Brown defined as fund flow statement as follows: 'A fund flow statement is prepared in summary form to indicate changes (and trends) are prepared regularly.' The purpose of the statement is to indicate how funds are raised and how the same have been used. ICWA defined fund flow statements as either prospective or retrospective, and it was noted that they set out the sources and application of funds. Anthony, 'A fund flow statement describes the sources from which additional funds were derived and the uses to which these sources were applied.' Several definitions of fund flow statements have been proposed in the past.Īccording to Robert N. It shows the various means by which funds are obtained and used. This statement is known as the financial position or fund flow statement.Ī fund flow statement is a statement that shows the movement of funds and reports an enterprise's financial operations. Thus, these two statements show the financial highlights of the company.Ī third statement is prepared to show changes in assets and liabilities from the end of one period to the end of another period. The profit and loss account shows the income and expenditure of an accounting period (generally one year). The assets side of the balance sheet shows the development of resources in a company, whereas the liabilities side indicates its payments to outsiders. Thus, the balance sheet is a statement of an organization's assets and liabilities between two points in time. In general, financial statements such as balance sheets and profit and loss accounts, popularly known as income statements, focus on the net effect of various transactions on the operational and financial position of the company. In a nutshell, transactions that increase working capital are sources of funds, whereas transactions that decrease working capital are applications of funds.įrom the perspective of information users, the statement helps in understanding how efficiently funds are procured and how effectively the funds are employed. The fund flow statement describes the sources from which additional funds were generated and the areas or items to which these funds are used or applied. This is only a supplementary statement to 'time-honored statements (i.e., income statement and position statement, or balance sheet). Thus, a fund flow statement is a financial statement that reveals the methods by which the business activities have been financed and how the enterprise has used its funds between the opening and closing balance sheet dates. It is only those items that affect the net working capital of the business that find a place in this statement. Hence, the difference between the sources and application of funds shows the net change in the working capital during the year/period. The term 'flow' indicates change, and hence, a fund flow refers to a change in funds or a change in working capital.įunds flow into working capital from the sources of funds, which include trading profits, issue of shares and/or debentures, borrowings, sale of fixed assets, repayment of borrowings, payment of tax, dividends, and increase in working capital. The flow of funds refers to the transfer of economic value from one asset to another, from one equity to another, from one asset to equity, or from one equity to other assets (or a combination of any of these).

The statement reflects the efficiency of financial management staff in generating funds from various sources and applying them to generate income without sacrificing the company's financial health. A fund flow statement reveals the periodic increase or decrease in a business enterprise's funds.

Cash flow statement format in excel