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What is Fund Flow Statement

FUND FLOW STATEMENT

An analysis of the fluctuations of current assets and current liabilities i.e. working
capital tells us how the working capital has increased or decreased. Now, we want to
know where the increased working capital is applied if it has increased, and from
where funds have been transferred if it has decreased. The profit and loss account
gives some indication of the results of operations and its impact on the funds position.
We try to integrate the impact of operations reported in the profit and loss account and
balance sheet by preparing a statement of changes in the financial position. It
describes the sources from which funds were received and the uses to which funds
were put. This statement of changes in financial position is usually referred to as fund
flow statement or statement of sources and application of funds.
As the title indicates fund flow statement traces the flows of funds through the
organisation. In other words, it shows the sources from where the funds were raised
and the uses to which they were put

Inflow

The statement of funds flow is usually bifurcated into two logical divisions: sources
of funds or inflows during the periods and uses of funds or applications of funds or
outflows of funds during the period. The division showing sources of funds
summarises all those transactions, which had the net effect of increasing working
capital. Uses of funds on the other hand deal with all those transactions, which had the
effect of decreasing the working capital. We shall illustrate the primary structure of flows in

Outflows

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