METHODS OF PREPARING FUND FLOW STATEMENT - Accounts and Finance for Managers

How to Prepare Fund Flow Statement with Example ?

Steps in the preparation of Fund Flow Statement:

  • First and fore most method is to prepare the statement of changes in working capital i.e., to identify the flow of fund / movement of fund through the detection of changes in the volume of working capital.
  • Second step is the preparation of Non- Current A/c items-Changes in the volume of Non current a/cs have to be prepared only in order to quantify the flow fund i-e either sources or application of fund.
  • Third step is the preparation Adjusted Profit& Loss A/c, which already elaborately discussed in the early part of the section.
  • Last step is the preparation of fund flow statement.

Schedule of Changes in Working Capital

The ultimate purpose of preparing the schedule of changes in the working capital is to illustrates the changes in the volume of net working capital which envisages either sources or application of fund. The schedule of changes are focused as follows:

Schedule of Changes in Working Capital

Schedule of Changes in Working Capital

The first method is widely used method by all in determining the volume of Fund from Operations (FFS)

Under the Net Profit Method, Fund flow from operations can be computed

Net Profit Method

Under this method, Fund from operations can be determined in two different ways .The first method is through the statement format

Net Profit Method

fund-flow2

The second method of determining the fund from operations under the first classification is the Accounting Statement Format.

Schedule-of-Changes-in-Working-Capital

Sales Method

Under this method, the following is the statement format is used to arrive fund flow from operations:

Sales Method

From the following details calculate funds from operations:
Sales Method

Sales Method

First Method
First Method

Second Method

Second Method

The next step is to prepare the fund flow statement. The proforma of the fund flow statement

Second Method


All rights reserved © 2018 Wisdom IT Services India Pvt. Ltd DMCA.com Protection Status

Accounts and Finance for Managers Topics