1. UNIT – III FUND FLOW STATEMENT
DEPARTMENT OF MANAGEMENT STUDIES
UNIT – III FUND FLOW STATEMENT
7/20/2018
Dr. G. MAHESWARAN/AP
1/21

2. AND LIMITATIONS OF FUND FLOW STATEMENT. 
WHAT IS FUND FLOW?
DIAGRAM OF FUND FLOW
USES
AND LIMITATIONS OF FUND FLOW
STATEMENT.
OBJECTIVES OF FUND FLOW STATEMENT.
DIFFERENCE BETWEEN FUND FLOW AND CASH
FLOW STATEMENT
PREPARATION OF FUND FLOW STATEMENT.
CONCLUSION.
BIBLIOGRAPHY.  
Dr. G. MAHESWARAN/AP
2/21
7/20/2018

3. IN NARROW SENSE,IT MEANS CASH ONLY AND A 
IN NARROW SENSE,IT MEANS CASH ONLY AND A
FUNDS FLOW STATEMENT PREPARED ON THIS BASIS IS
CALLED A CASH FLOW STATEMENT.SUCH A
STATEMENT ENUMERATES NET EFFECTS OF THE
VARIOUS TRANSCATIONS ON CASH AND TAKES INTO
ACCOUNT
RECIPTS
AND DISBURSEMENT OF CASH. 
IN A BROADER SENSE, THE TERM ‘FUNDS’ REFERS TO
MONEY VALUES IN WHATEVER FORM IT MAY EXSIST.
MEANS ALL FINANCIAL RESOURCES USED IN BUSINESS
WHETHER IN THE FORM OF MEN,MATERIAL
,MONEY,MACHINERY,METHODES ETC.
IN A POPULAR SENSE THE TERM ‘FUNDS’ MEANS 
WORKING CAPITAL
WHICH IS THE EXCESS OF
CURRENT ASSETS OVER CURRENT LIABILITIES
Dr. G. MAHESWARAN/AP
3/21
7/20/2018

4. TRANSFER OF ECONOMIC VALUES FROM ONE ASSET OF EQUITY TO ANOTHER. 
TRANSFER OF ECONOMIC VALUES FROM ONE
ASSET OF EQUITY TO ANOTHER.
MOVEMENT OF FUNDS IN WORKING CAPITALS
IT TAKES PLACE WHEN ANY TRANSACTION
MAKES CHANGES IN THE AMOUNT OF FUNDS
AVAILABLE BEFORE HAPPENING OF THE
TRANSACTION.
IF THERE IS INCREASE OF FUNDS,IT IS SOURCE
OF FUNDS
IF THERE IS A DECREASE OF FUNDS,IT IS AN
APPLICATION OF FUNDS   
INCREASES
DECREASE
SOURCE OR INFLOW
APPLICATION OR OUT FLOW
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7/20/2018
Dr. G. MAHESWARAN/AP

5. USES: BUSINESS. PROFITS. AS AN INSTUMENT FOR ALLOCATION
 EXPLAINS THE FINANCIAL CONSEQUENSES OF
BUSINESS.
 DEBT CAPITAL IS ESSENTIAL FOR INCREASED
PROFITS.
 ACTS
AS AN INSTUMENT FOR ALLOCATION
OF COMPANY’S RESOURCES.
 TEST FOR EVALUATING USE OF WORKING
CAPITAL BY THE MANAGEMENT
INFORMATION.
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7/20/2018
Dr. G. MAHESWARAN/AP

6.  IGNORES NON – FUND ITEMS.
 DOES NOT REVEAL SHIFTS ITEMS MAIKING UP
THE CURRENT ASSETS AND CURRENT
LIABILITIES.
 IT IS HISTORICAL IN NATURE.
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7/20/2018
Dr. G. MAHESWARAN/AP

7. CHANGES THAT HAS TAKEN PLACE, DURING A SPECIFIC PERIOD.
 TO INDICATE THE RESULTS
FINANCIAL MANAGEMENT.
OF CURRENT
 TO LAY EMPHASIS ON THE MOST SIGNIFICANT
CHANGES THAT HAS TAKEN PLACE, DURING A
SPECIFIC
PERIOD.
 TO SHOW HOW GENERAL EXPANSION IN THE
BUSINESS HAS BEEN FINANCED OR TO
DESCRIBED THE SOURCES FROM WHICH
ADDITIONAL
FUNDS WERE DERIVED.
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7/20/2018
Dr. G. MAHESWARAN/AP

8. BETWEEN PROFIT FROM OPERATIONS, DISTRIBUTION OF DIVIDEND AND RISING OF
 TO ESTABLISHED THE RELATIONASHIP
BETWEEN PROFIT FROM OPERATIONS,
DISTRIBUTION OF DIVIDEND AND RISING OF
CAPITAL OR CONTRATING OF LOANS.
 TO GIVE RECOGNITION TO THE FACT THAT A
BUSINESS EXISTS IN THE FLOW OF FUNDS AND
IS NOT
STATIC ORGANISATION.
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7/20/2018
Dr. G. MAHESWARAN/AP

9. FUND FLOW STATEMENT CASH FLOW STATEMENT NECESSARY.
1. IT IS BASED ON THE CONCEPT
OF WORKING CAPITAL..
2. IT REVEALS CHANGES IN
WORKING CAPITAL POSITION
BETWEEN TWO BALANCE SHEET
DATES.
3.CLASSIFICATION OF ASSETS AND
LIABILITIES INTO CURRENT AND
NON – CURRENT CATEGORIES IS
ESSENTIAL.
4. THESE STATEMENTS MATCH
SOURC ES AND APPLICATION OF
FUND.
1. IT IS BASED ON THE CONCEPT
OF CASH.
2. IT REVEALS CHANGE IN CASH
POSITION BETWEEN TWO
BALANCE SHEET DATES.
3. NO SUCH CLASSIFICATION
NECESSARY.
4. IT COMMENCES WITH OPENING
CASH BALANCE AND ENDS WITH
CLOSING CASH BALANCE.
9/21
7/20/2018
Dr. G. MAHESWARAN/AP

10. FUND FLOW STATEMENT CASH FLOW STATEMENT FINANCIAL ANALYSIS.
5. AN IMPROVEMENT IN CASH
POSITION RESULTS IN THE
IMPROVEMENT IN WORKING
CAPITAL.
6. IT IS LONG –TERM TOOL
FINANCIAL ANALYSIS.
5. AN INCREASE IN CASH ON HAND
DOES NOT RESULT IN INCREASE IN
WORKING CAPITAL..
6. IT IS A SHORT – TERM TOOL OF
FINANCIAL ANALSIS.
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7/20/2018
Dr. G. MAHESWARAN/AP

11. ISSUE OF SALES OF FIXED Long term Operational
SHARES ASSETS borrowings profit
Funds
Redemption of Purchase of Payment or long Payment of
pref.shares fixed assets term loans tax/Dividend.
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7/20/2018
Dr. G. MAHESWARAN/AP

12. INVOLVES TWO STATEMENTS:
1. STATEMENT OR SCHEDULE OF CHANGES IN
WORKING CAPITAL
2. SOURCES AND USES OF FUND STATEMENT.
12/21
7/20/2018
Dr. G. MAHESWARAN/AP

13. 1. INCREASE IN CURRENT ASSET, RESULTS
 RULES FOR PREPARING THE STATEMENT OF CHANGES IN
WORKING CAPITAL:
1. INCREASE IN CURRENT ASSET, RESULTS
INCREASE (+) IN WORKING CAPITAL.
2. DECREASE IN CURRENT ASSET, RESULTS
DECREASES (-) IN WORKING CAPITAL. IN IN
3. INCREASE IN A CURRENT LIABILITY, RESULTS
IN DECREASE (-)
4. DECREASE IN A
IN INCREASE (+)
IN WORKING CAPITAL.
CURRENT LIABILITY, RESULTS
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Dr. G. MAHESWARAN/AP
7/20/2018

14. RS. INCREASE RS. DECREASE RS. PREVIOUS YEAR RS. CURRENT YEAR EFFECT OF
WORKING
CHANGE ON
CAPITAL
INCREASE
RS.
DECREASE
RS.
CURRENT
ASSETS
CASH
BANK
B/R
DEBTORSSTOCK
PREPAID
EXPENSES
TOTAL (a)
CURRENT
LIABILITIES
OUTSTANDING
EXP
B/P
CREDITORS
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Dr. G. MAHESWARAN/AP
7/20/2018

15. TOTAL (b) WORKING CAPITAL
WORKING CAPITAL (a-b) NET INCREASE/DECREASE IN
WORKING CAPITAL
15/21
Dr. G. MAHESWARAN/AP
7/20/2018

16. Eg.: FROM THE FOLL. TWO BALANCE SHEETS ON
AND PREPARE A SCHEDULE
OF CHANGES IN WORKING CAPITAL.
LIABILITIES
2002
RS.
2001
RS.
ASSETS
2002
RS.
2001
RS.
SHARE
CAPITAL
P and L A/C 9%
DEBENTURES
TRADE
CREDITORS
OUTSTANDING
3,25000
1,20000
2,00000
98,000
2,000
7,45000
3,00000
1,00000
2,00000
75,000
5,000
6,80000
LAND &,
BUILDINGS
MACHINERY
STOCK – IN
TRADE
DEBTORS
CASH
5,00000
1,00000
1,00,000
30,000
5,000
7,45,000
4,00000
1,60000
80,000
36,000
4,000
6,80000
16/21
Dr. G. MAHESWARAN/AP
7/20/2018

17. RS. RS. WORKING CASH (a) TOTAL CURRENT ASSET 36,000 4,000 30,000 5,000
2001
RS.
2002
RS.
EFFECTS ON
CAPITAL
WORKING
INCREASE
(+)
RS.
DECREASE
(-)
RS.
CURRENT ASSETS:
STOCK – IN TRADE
DEBTORS
CASH
(a) TOTAL CURRENT
ASSET
80,000
36,000
4,000
1,10,000
30,000
5,000
30,000
1,000
6,000
1,20000
1,45,000
17/21
Dr. G. MAHESWARAN/AP
7/20/2018

18. -b) 45,000 45,000 34,000 34,000 CURRENT LIABILITIES: TRADE CREDITORS
OUTSTANDING
(b) TOTAL CURRENT
LIABILITIES
WORKING CAPITAL (a
-b)
NET INCREASE IN
WORKING CAPITAL
75,000
5,000
98,000
2,000
3,000
23,000
5,000
80,000
1,00,000
40,000
5,000
45,000
45,000
45,000
34,000
34,000
18/21
Dr. G. MAHESWARAN/AP
7/20/2018

19. SOURCES RS. APPLICATIONS RS. LONG TERM & MIDDLE – TERM LAONS TAKEN
ISSUES OF SHARES
ISSUES OF
DEBENTURES
LONG TERM & MIDDLE
– TERM LAONS TAKEN
SALES OF
INVESTMENTS
SALES OF FIXED
ASSETS
TRADING PROFITS
NON – TRADING
INCOME
NET DECREASE IN
WORKING CAPITAL, AS
PER SCHEDULE OF
REDEMPTION OF SHARES
REDEMPTION OF
DEBENTURES
REPAYMENT OF LOANS
PURCHASE OF
INVESTMENTS
PURCHASE OF FIXED
ASSETS
PAYMENT OF DIVIDENDS
(LAST YEAR AND INTERIM)
FUNDS LOST FROM
OPERATIONS
NON – TRADING PYMENTS
NET INCREASE IN WORKING
CAPITAL AS PER SCHEDULE
OF CHANGES IN WORKING
19/21
Dr. G. MAHESWARAN/AP
CHANGES IN WORKING
CAPITAL

20. organization. It can really determine how the business should be
Fund
flow
statement is
very
important
for
every
organization. It can really
determine how the business
should be
carried on in
the
future. we
can
proper
utilize the budget of the company and the strategy to
cope the financial problems of the company through
the
preparation of
the
fund
flow
statement.
As we
know the aim of fund flow statement is to know the
working capital of the company whether it increases or
decreases during
a given
period of
time. So it in is a
main
tool to
make a
organization to
survive
the
future.
20/21
Dr. G. MAHESWARAN/AP
7/20/2018

21. THANK
YOU
21/21
Dr. G. MAHESWARAN/AP
7/20/2018