Funds Flow Analysis
Fund Flow Statement or Flow of funds is a statement of source and application of funds.
From where did the funds come? = Sources of fund
Where did the funds go? = Applications of fund
Funds Flow Analysis:
The Funds Flow analysis involves preparation of
1. Statement of changes in working capital and
2. Statement of sources and application of funds.
Example of Funds Flow analysis:
The following figures are given. Funds Flow Analysis is required to be prepared.
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31-12-2008
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31-12-2009
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Cash
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$130,000
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$40,000
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Debtors
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$100,000
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$160,000
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Stock
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$235,000
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$255,000
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Land
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$540,000
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$1,020,000
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Plant
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$2,804,000
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$3,544,000
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Furniture
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$210,000
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$210,000
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TOTAL ASSETS
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$4,019,000
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$5,229,000
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Creditors
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$319,000
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$365,000
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Provision for
Dividend
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-
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$200,000
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Debentures
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-
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$535,000
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Equity Capital
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$3,600,000
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$4,000,000
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Profit & Loss a/c
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$100,000
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$129,000
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TOTAL LIABILITIES
AND OWNER’S EQUITY
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$4,019,000
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$5,229,000
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Solution:
Step 1: Statement of changes in working capital
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2008
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2009
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Increase
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Decrease
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Cash
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$130,000
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$40,000
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$90,000
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Debtors
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$100,000
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$160,000
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$60,000
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Stock
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$235,000
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$255,000
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$20,000
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Total Current assets(A)
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$465,000
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$455,000
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Creditors
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$319,000
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$365,000
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$46,000
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Total current liabilities(B)
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$319,000
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$365,000
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Working capital(A)-(B)
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$146,000
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$90,000
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Release/Decrease in WC
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$56,000
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$56,000
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$146,000
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$146,000
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$136,000
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$136,000
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Step 2: Statement of Sources and Application of funds
For the year ended 31-12-2009
Sources
Applications
Funds from Trading operations
Purchase of land $480,000
(incl.prov.for dividend)
$229,000
Purchase of plant $740,000
Issue of equity capital
$400,000
Issue of debentures
$535,000
Decrease in Working capital
$56,000
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