c
m
m

The net of all cash inflows and outflows in and out of various financial assets. Fund flow is
usually measured on a monthly or quarterly basis. The performance of an asset or fund is not
taken into account, only share redemptions (outflows) and share purchases (inflows).

Net inflows create excess cash for managers to invest, which theoretically creates demand for
securities such as stocks and bonds.

a  

 m
m

Investors and market analysts watch fund flows to gauge investor sentiment within specific asset
classes, sectors, or for the market as a whole. For instance, if net fund flows for bonds funds
during a given month is negative by a large amount, this would signal broad-based pessimism
over the fixed-income markets.
  
 
 
Ô

 Ô 




updated: April 29, 2010

Use a fund flow statement to evaluate a company's success.

A fund flow statement, better known as a cash flow statement, is an important document in the
accounting world. A fund flow statement shows a company's inflows and outflows of funds. It is
used to show investors, stakeholders or owners where the company's money came from and
where it went.

a

1. A fund flow statement is an important tool used in evaluating a company's performance.
A fund flow statement is a statement that shows all money coming in to a company and
all money leaving a company during an accounting period. This statement is used by
investors when considering investing in a company. The fund flow statement shows
problems a company has if the cash flow is negative.



2. Fund flow statements are prepared as often as needed. Small businesses prepare them
more often, usually monthly, quarterly and annually. Larger businesses typically prepare
them less often, usually quarterly and annually.

¬  
D. The two methods for preparing fund flow statements are the direct method and the
indirect method. The direct method is used less often, making the indirect method the
preferred way of preparing it.

0  
 ]. A fund flow statement is prepared by comparing two accounting period's balance sheets.
The statement is divided into three sections; cash flows from operations, cash flows from
investing activities and cash flows from financing activities. The indirect statement
begins by taking net income from the balance sheet. All other items are compared using
the balance sheets and the differences are either added or subtracted to net income to find
the total. The statement concludes with the net increase or decrease in cash.

a  a 
 

m. chen this statement is completed and analyzed, an investor sees the increase or decrease
in cash for a specific period. This statement shows where the money came from and
went. If there is a decrease in cash for the period, the investor sees whether it's from
paying off debt, investing in new assets or failing to collect assets owed. This statement
speaks loudly to investors as to the condition of the company. Generally, a company with
poor cash flow is not a good company to invest in.

Read more: Definition of a Fund Flow Statement | eHow.com

http://www.ehow.com/about_6D9870D_definition-fund-flow-statement.html#ixzz1EL6pYkli
Elaborate on limitations of fund flow statement?
a Job Training and Career Qualifications [Edit categories]
¬

¬
 ¬¬
¬¬


 

¬¬
 
[Improve]

^ 
Fund may be interpreted in various ways as (a) Cash, (b) Total current assets. Net working
capital, (d) Net current assets. For the purpose fund  statement the term fund means net
working capital. The flow fund will occur in a business, when a transaction results in a change i
increase or decrease in the amount of fund.
According to Robert Anthony, the Fund Flow Statement describes t sources from which
additional funds were derived and the uses to which these funds were put.
Different Names of Fund-flow Statement
* A Funds Statement
* A statement of sources and uses of fund
* A statement of sources and application of fund
* chere got and where gone statement
* Inflow and outflow of fund statement
Objectives of Fund Flow Statement
The main purposes of Fund Flow Statement are:
1. To help to understand the changes in assets and asset sources which are not readily evident in
the income statement or financial statement.
2. To inform as to how the cans to the business have been used.
D. To point out the financial strengths and weaknesses of the business

. Format of Fund Flow Statement

Sources Applications
Fund from operation -‡ Fund lost in operations
Non-trading incomes - Non-operating expenses
Issue of shares - Redemption of redeemable preference share
Issue of debentures- Redemption of debentures
Borrowing of loans Repayment of loans
Acceptance of deposits Repayment of deposits
Sale of fixed assets Purchase of fixed asset

Sale of Investments Purchase of long term Instruments

(Long Term)
Decrease in working capital Increase in working capital
Steps in Preparation of Fund Flow Statement

1) Preparation of schedule changes in working capital (taking current items only).

2) Preparation of adjusted profit and loss account (to know fund from [or] fund lost in
operations).

D Preparation of accounts for non-current items (Ascertain the hidden information).

]) Preparation of the fund flow statement.
Format of Schedule of Changes in corking Capital

Particulars Previous Year Current year Increase In
 


 c/c
Current Assets
Cash in hand
Cash at bank
Bills receivable
Debtors
Inventory
Prepaid expenses
Short-term investment
(A) Total
Current Liability
Bills payable
Creditors
Outstanding expenses
Accrued expenses
Income received in advance
Bank overdraft
Cash credit from banks
Short-term loan
Short-term deposit
Provision for taxation
Proposed dividend
Provision against current assets
(B) Total
corking Capital (C)
(C = A - B)
Increase in 


Decrease in c/C

Fund from operation can be ascertained by preparing adjusted profit and

loss account. It may be prepared in statement form or account form.
Format of Adjusted Profit and Loss Account

To Bal. B/d (P&L Account Dr. Bal.) By Bal. B/d (P&L Account Cr. Bal.)
To Non-operating Exp. By Non-operating Incomes
To Depreciation on Fixed Assets By Profit on sale of Investment
To Goodwill written-off By profit on sale of fixed asset
To Patent & trademark of f By Dividend on Investment
To Preliminary expenditure By Interest on Investment
To Discount on issue of shares & By Rent received, gift received
Debentures
To Loss on sale of investment By Damages received under law
To Loss on sale of Fixed Assets By Transfer from general reserve

Read more:
http://wiki.answers.com/Q/Elaborate_on_limitations_of_fund_flow_statement#ixzz1EL8M8lak
a

   
 June 1]th, 2009

Funds flow statement is a financial statement, which shows as to how a business entity has
obtained its funds & how it has applied or employed its funds between the opening & closing
balance sheet dates(during the particular year/period.

Importance of funds flow statement:

Funds flow statement is an important analytical tool for external as well as internal uses of
financial statements. The users of funds flow statement can be listed as under :

1. Management s of various companies are able to review cash budgets with the aid of funds
flow statements. They are extensively used by the management in the evaluation of alternative
finance & investments. In the evaluation of alternative finance & investment plans, funds flow
statement helps the mangement in the assessment of long-range forecasts of cash requirements &
availability of liquid resources. The management can judge the quality of management decisions.

2. Investors are able to measure as how the company has utilized the funds supplied by them &
its financial strength with the aid of funds statements. They gauge can the company capacity to
generate funds from operations. On the basis of comparative study of the past with the present,
investors can locate & identify possible drains on funds in the near future.

D. Funds statement serve as effective tools to the management for economic analysis as it
supplies additional information, which cannot be provided by financial statements, based on
historical data.

]. Fund statement explains the relationship between changes in working capital & net profits.
Funds statement clearly shows the quantum of funds generated from operations.

m. Funds statement helps in the planning process of a company. They are useful in assessing the
resources available and the manner of utilization of resources.

6. Funds statement explains the financial consequences of business activities. They provide
explicit & clear awareness to questions regarding liquid & solvency positions of the company,
distribution of dividend & whether the working capital has been effective or otherwise.

7. Management of companies can forecast in advance the requirements of additional capital &
can plan its capital issue accordingly.

8. Fund statement provide clues to the creditors & financial institutions as to the ability of a
company to use funds effectively in the best interest of the investors, creditors & the owners of
the company.

9. Funds statement indicates the adequacy or inadequacy of working capital.

10. The information contained in fund flow statement is more reliable, dependable & consistent
as it is prepared to include funds generated from operations & not net profit after depreciation.

11. Funds flow statement clearly indicate how profits have been invested, whether investments in
fixed assets or inventories or ploughed back.

a

     

Funds flow statement is an important financial tool, which analyze the changes in financial position of a
firm showing the sources and applications of its funds. It provides useful information about the firm's
operating, financing and investing activities during a particular period. The following points highlight the
importance of funds flow statement.

1. Funds flow statement helps in identifying the change in level of current assets investment and current
liabilities financing.
2. Funds flow statement helps in analyzing the changes in working capital level of a firm.
3. Funds flow statement shows the relationship of net income to the changes in funds from business
operation.
4. Funds flow statement reports about past fund flow as an aid to predict future funds flow.
5. Funds flow statement helps in determining the firms' ability to pay interest and dividend, and pay
debt when they become due.
6. Funds flow statement shows the firms' ability to generate long-term financing to satisfy the
investment in long-term assets.
7. Funds flow statements helps in identifying the factor responsible for changes in assets, liabilities and
owners' equity at two balance sheet date
c

 
 

A fund flow statement and cash flow statement are basically one and same. There is no
difference between the two, except for their names. The fund flow statement can be defined as
"«the financial statement that summarizes and reveals essential changes of cash and cash
equivalent elements of a balance sheet, that have changed in the past or current accounting year,
can be termed as a fund flow statement«". The International Accounting Standard 7, gives a
more comprehensive and specified definition of the fund flow statements as well as the
prescribed manner in which the statement can be calculated.

To know more about cash flow statements, you may also refer to:

M Cash Flow Statement Template

M Cash Flow Notes

 
 
 

The query 'how to prepare a fund flow statement?', is often left unheeded. Preparing such a
statement is quite easy all you need is a balance sheet and the appropriate proforma. The
following is a small proforma of a fund flow statement and will give you a brief idea about how
an ordinary fund flow statement shall look«




 ^ 

1. 0
 
 

(+) Cash receipts from customers Xx
(-) Cash paid to suppliers and employees Xx
(+) Income from operations Xx
(-) Interest paid Xx
(-) Income taxes paid Xx
(Total) Net cash flows from operating activities Xx
2. 0
   

(+) Proceeds from the sale of assets Xx
(-) Dividends received Xx
(Total) Net cash flows from investing activities Xx
D. 0
 
 

(-) Dividends paid Xx
(-) Net cash flows used in financing activities Xx
(Total) Net increase in cash and cash equivalents Xx
(+) Cash and cash equivalents balance brought down (at the beginning of year) Xx
(Total) 0
 

 !
 "


   
  #
 $

As you have noticed, the fund flow statement basically concentrates upon the inflow and outflow
of cash, in a given time period. The basic intention of making such statements is provide
management personnel with appropriate figures of income and expenditures. The analysis of a
fund flow statement is a crucial aspect of what is known as a balance sheet analysis. The
statement in the balance sheet and annual report of companies often informs the investors of the
performance of the company. Many people who consider a single balance sheet as a misleading
document, consult the fund flow statement to clarify their doubts regarding the inward and
outward cash flows of the year.

In some companies, where the organization is engaged in per unit production, departments use
fund flow statement analysis to derive the daily output of one production unit, be it a man or a
machine. 'Depiction of monetary figures' is of at most importance and shortcomings of fund flow
statement such as ignorance of reputation, human quality, accuracy and quality of work, often
make this statement a documents with certain limitations.

To know more about such financial terms, you may also refer to:

M Accounting Terms
M Financial Glossary

Economists, financial experts and chartered accountants and auditors, have criticized and
advocated the use of fund flow statement. But by the end of the day, when the CEO's secretary
hands in the fund flow statement for that day, it becomes nothing but a blunt fact that states a
monetary truth for the day. Sometimes it makes me wonder, that why do we as a society measure
an operation only from the point of view of a money? How is the sincerity and efforts of a
machine loving engineer, sweating workman and pondering accountant measured?
 

  
 

The funds flow statement is prepared to reflect the changes in the financial position of an
organization during a particular period. As such, Balance sheets of the organization at the
beginning and end of the particular period are the basic documents that are needed for
preparation of funds flow statement.

Please find below funds flow statement for your reference.

%$&'( %


 
^
   #
  )))))

¦ 

 




Issue of share capital xxx Redemption of redeemable Pref. xxx

shares
Issue of Debentures xxx xxx
Redemption of Debentures
Long term Loans Raised xxx xxx
Repayment of Long Term Loans
Sale of L.T.Investments xxx xxx
Purchase of Fixed assets
Sale of Fixed Assets xxx xxx
Purchase of L.T. Investments
Receipts from Partly paid xxx xxx
Fund Lost in operation
shares called up xxx xxx
Non Trading Operations
Funds from operations xxx xxx
Non Trading Exp.
Non trading income xxx xxx
Payment of dividend
Decrease in corking Capital xxx
Increase in corking Capital
 

The fund flow statement can also be presented in a vertical form. In such a case, all sources are
listed down, totaled and then all Applications are listed at one place and totaled. The totals
should be the Increase and decrease in corking capital.