Funds Flow Statement
Funds Flow Statement
Funds Flow Statement
“The funds flow statement describes the sources from which additional
funds were derived and the use to which these funds were put.”
Flow of funds
It means changes in funds or change in working capital
Source of fund
It is any transaction that results in an increase in working capital (inflow of
funds)
Application of funds
It is any transaction that results in a decrease in working capital (outflow of
funds)
Sources Applications
Redemption of Debentures
Issue of Debentures
There are 2 options for treatment of Provision for tax and proposed dividend
ie they may be treated as
1. A current liability
a. Included in schedule of changes in working capital
b. No further adjustment required
2. An appropriation of profit
a. The provision of tax for the year and/or dividend proposed
during the year is added back to net profit to calculate funds
from operations
b. The amount of tax or dividend paid in current year is shown as
an application of funds