Fund Flow Statement Essay Example

Store Flow Statement Paper Assets FLOW STATEMENT Meaning The term â€Å"Flow† implies change and in this way, the term â€Å"Flow of Funds† implies â€Å"Change in Funds† or â€Å"Change in Working Capital â€Å". In different works, any expansion or decline in working capital methods â€Å"Flow of Funds†. There are two ideas of working capital †net idea and net idea. †¢ Gross working capital alludes to the firm’s interest in current resources †¢ Net working capital methods overabundance of current resources over current liabilities. In business a few exchanges happen. A portion of these exchanges increment the assets while others decline the assets. Some may not roll out any improvement in the assets position. On the off chance that an exchange brings about increment in reserves, it will be named as â€Å"source of funds†. Eg. 1. Issue of sharesâ â â â â â â â â inflow of fundsâ â â â â â â â â â â wellspring of reserve  â â â â â 2. Acquisition of advantages  â â â â â â prompts outgo of fundsâ â â â â â â use of assets As indicated by the International Accounting Standard 7, the term ‘Fund’ alludes to money, to money and money proportional, or to working capital. The term ‘flow’ alludes to change and along these lines the term ‘Funds flow† alludes to ‘change in funds’ or ‘change in working capital’. As such, any expansion or lessening in working capital methods ‘flow of funds’. Working capital = Current Assets †Current Liabilities  |â | |CURRENT ASSETS |CURRENT LIABILITIES | |â | |â | |Cash and bank adjusts |Accounts payable | |Inventory Sundry lenders | |Sundry Debtors |Bank overdraft | |Temporary ventures |Unclaimed profits | |Pre-paid costs |Provision for taxation* | |Outstanding earnings |Proposed dividends* | |Accounts receivables |Short term credits | |Bills receivables |â | |â | *Provision for Taxation: It can be treated in two different ways: 1. Treated as present risk: when there is no personal a ssessment paid or extra arrangement made it is treated as present obligation. We will compose a custom exposition test on Fund Flow Statement explicitly for you for just $16.38 $13.9/page Request now We will compose a custom article test on Fund Flow Statement explicitly for you FOR ONLY $16.38 $13.9/page Recruit Writer We will compose a custom article test on Fund Flow Statement explicitly for you FOR ONLY $16.38 $13.9/page Recruit Writer It very well may be taken to timetable of changes in working capital. No further treatment is required. 2. Treated as non-current obligation: A record account (Provision for tax assessment a/c) is readied. Some of the time we may need to show up at annual duty paid during the year from the given data. *Proposed Dividend: It can be treated in two different ways: 1. Treated as present obligation: Proposed profit might be taken as Current risk since announcement of profits by investors is essentially a custom. It is taken to timetable of changes in working capital with no further treatment. 2. Treated as non-current obligation: Proposed profit can be taken as an assignment of benefit. In such a case, proposed profit for the present year will be added back to current year’s benefit so as to discover assets from activities if such measure of profit has just been charged to benefit. Installment of profit will be appeared as an utilization of reserve. NON CURRENT ASSETS AND NON CURRENT LIABILITIES |NON CURRENT LIABILITIES |NON CURRENT ASSETS | |Share capital |Fixed resources | |Long term advances |Fictitious resources like altruism, licenses, copyrights, | |Debentures |trademarks. |Share premium a/c |Long term speculations | |Forfeited shares a/c |Profit and misfortune a/c (charge balance) | |Profit and misfortune a/c (credit bal) |Discount on issue of offers debentures | |Appropriation of benefits |Deferred uses like primer costs, advertising| |Provision for tax collection |expenses. | |Provision for deterioration | |Capital hold | |â | Non finance Transaction: If the assets are Rs. 10000 and a fixed resource of Rs. 5000 is bought by giving portions of Rs. 0 00 the assets position won't change and along these lines this exchange will be taken as a non-subsidize exchange. Asset report as on †¦Ã¢â‚¬ ¦. |Non-current liabilities: |â |Non-current Asset |â | |Share Capital: |â |Goodwill |50000 | |16% Redeemable Preference Shares of |â |Buildings |1,00,000 | |Rs. 10 each |â |Plant |1,00,000 | |1,00,000 |Furniture |â â 50,000 | |Equity portions of Rs. 0 each |â |Long term Investment |â 50,000 | |1,00,000 | |Long term Loans: |â | |12%Debenture |1,00,000 | |Loan on Mortgage |â â 50,000 |â | |Reserves Surplus: |â | |General save |1,00,000 | |Profit Loss a/c |â â 50,000 | |Total non-current liabilities |â |Total Non-current Assets |â | |5,00,000 | |3,50,000 | |Current liabilities: |â |Current Assets: |â | |Sundry banks |â 50,000 |Sundry Debtors |â â 80,000 | |Bills Payable |â 50,000 |Bills receivable |â â 50,000 1,00,000| |Bank Overdraft |â 25,000 |Inventories |â â 50,000 | |Outstanding costs  25,000 |Pre-paid Expenses |â â 20,000 | |Cash balance | |Total current liabilities |1,50,000 |Total current resources |3,00,000 | |Total liabilities |6,50,000 |Total resources |6,50,000 | Computation of Working capital: CURRENT ASSETS              â â â â â â â â â â â â Rs. 3,00,000 CURRENT LIABILITIES  â â â â â â â â â â â â Rs. 1,50,000 NET WORKING CAPITAL          â â â 1,50,000 There will be stream of assets by virtue of progress in working capital position. A couple of free exchanges are given underneath and the impact of every one of the exchange on stream of assets is resolved. 1. The organization acknowledges Rs. 20,000 from its account holders. †¢ Debtors will lessen from Rs. 80,000â â â â â â â â â â â â â  toâ Rs. 60,000 †¢ Cash equalization will increment from Rs. 20000 toâ Rs. 40,000 CURRENT ASSETS              â â â â â â â â â â â â Rs. 3,00,000 CURRENT LIABILITIES  â â â â â â â â â â â â Rs. 1,50,000 ___________ NET WORKING CAPITAL            1,50,000 ___________ There will be stream of assets because of progress in working capital position. †¢ This exchange won't acquire any change the working capital since it is essentially transformation of one current resource into another present resource. 2. The organization pays to its lenders a whole of Rs. 10,000 out of the money balance. †¢ Cash balance gets diminished from Rs. 20,000 to Rs. 10,000â â â â â â â â â â â â â â â â â â â †¢ Sundry loan bosses will stand diminished from Rs. 50,000â to Rs. 40,000 CURRENT ASSETS              â â â â â â â â â â â â Rs. 2,90,000 CURRENT LIABILITIES      â â â â â â â â â â â â Rs. 1,40,000  â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â ________ WORKING CAPITAL              â â â â â â â â â â â â  â â â â 1,50,000  â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â ________ There will be no adjustment in working capital position 3. The organiza tion buys furniture of Rs. 10,000 by raising long haul advances of Rs. 10,000. This exchange won't have any impact on working capital situation, since the exchange includes non-current resource and a non-current risk which are not the constituents of working capital. 4. The organization reclaims inclination portions of Rs. 1,00,000 by giving 12% debentures of Rs. 1,00,000. †¢ This exchange won't include any adjustment in the working capital since both the records included are not the constituents of the working capital. 5. The organization raises Rs. 50,000 in real money by issue of new offers. †¢ This exchange will expand the money equalization of the organization from Rs. 20,000 to Rs. 70,000. The working capital position will be : Current Assetsâ â â â â â Rs. 3,50,000 Current Liabilitiesâ â Rs. 1,50,000 __________ Working capitalâ â â â â â â â â â â 2,00,000 ___________ This exchange will build the W. C 6. The organization sells its structure having a book estimation of Rs. 50,000 for a whole of Rs. 60,000. †¢ This exchange will build the money offset with the organization from Rs. 20,000 to Rs. 80,000. Current Assetsâ â â â â â Rs. 3,60,000 Current Liabilitiesâ â Rs. 1,50,000 __________ Working capitalâ â â â â â â â â â â 2,10,000 ___________ This exchange will build the W. C From the abovementioned, the accompanying general guidelines can be shaped: 1. There will be stream of assets if an exchange includes: †¢ Current resources and fixed resources, e. g. acquisition of working for money †¢ Current resources and capital, e. g. , issue of offers for money †¢ Current resources and fixed liabilities, e. g. edemption of debentures in real money †¢ Current liabilities and fixed liabilities, e. g. Loan bosses paid off in debentures †¢ Current liabilities and capital, e. g. , banks paid off in shares. †¢ Current liabilities and fixed asse