Preparing the Funds Flow Statement |
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Preparing the Funds Flow Statement |
| Statement of changes in Non-Current Accounts | ||||||
|---|---|---|---|---|---|---|
| Account | Balance as on 31st Dec | Change | Type | Result | ||
| 2004 | 2005 | Amount | Direction | |||
| Share Capital P/L Appropriation account Long Term Loans Machinery Land | 10,000 5,000 6,000 3,000 4,000 | 15,000 8,000 4,000 5,000 4,000 | 5,000 3,000 2,000 2,000 - | Increase Increase Decrease Increase No Change | Liability Liability Liability Assets Assets | Inflow Inflow outflow outflow No Flow |
Ledgers Show
| Dr | Machinery a/c | Cr | |||||
|---|---|---|---|---|---|---|---|
| Date | Particulars | J/F | Amount | Date | Particulars | J/F | Amount |
| 01/01/04 — | To Balance b/d To Bank a/c (?) | — — | 3,000 2,000 | 31/12/05 | By Balance c/d | — | 5,000 |
| 01/01/05 | To Balance b/d | — | 5,000 | ||||
| Dr | Share Capital a/c | Cr | |||||
|---|---|---|---|---|---|---|---|
| Date | Particulars | J/F | Amount | Date | Particulars | J/F | Amount |
31/12/04 | To Balance c/d | — | 15,000 | 01/01/04 — | By Balance b/d By Bank a/c (?) | — — | 10,000 5,000 |
| 01/01/05 | By Balance b/d | — | 15,000 | ||||
| Dr | Long Term Loan a/c | Cr | |||||
|---|---|---|---|---|---|---|---|
| Date | Particulars | J/F | Amount | Date | Particulars | J/F | Amount |
| — 31/12/04 | To Bank a/c (?) To Balance c/d | — — | 2,000 4,000 | 01/01/04 | By Balance b/d | — | 6,000 |
| 01/01/05 | By Balance b/d | — | 4,000 | ||||
From the ledger account holding the accumulated profits, (P/L appropriation account, Retained Earnings a/c etc), locate the posting to Funds from Operations.
Consider that posting as being similar in nature to posting to Bank/Cash. If the posting is on the credit side, it indicates an inflow and if it is on the debit side, it indicates an outflow.
Ledgers Show
| Dr | Profit and Loss Appropriation a/c | Cr | |||||
|---|---|---|---|---|---|---|---|
| Date | Particulars | J/F | Amount | Date | Particulars | J/F | Amount |
31/12/04 | To Balance c/d | — | 8,000 | 01/01/04 31/12/04 | By Balance b/d By Funds From Operations (?) | — — | 5,000 3,000 |
| 01/01/05 | By Balance b/d | — | 8,000 | ||||
Once we identify the inflows and outflows, placing the inflows as a group and then outflows as a group is all that we need to do to obtain the funds flow statement.
| Funds Flow Statement for the period from __ to __ | ||
|---|---|---|
| Particulars | Amount | Amount |
| a) Sources (Inflow) of Funds 1) Share Capital 2) Funds from Operations [P/L appropriation account] | 5,000 3,000 | 8,000 |
| b) Applications (Outflow) of Funds 1) General Reserve 2) Machinery | 2,000 2,000 | 4,000 |
| Change in Working Capital [a - b] | + 4,000 | |
Since the Net change is positive, there is an increase in Fund (Working Capital)
This statement is also sometimes called Statement of Sources and Applications of Funds
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