Fund Flow Statement Essay Example

Store Flow Statement Paper Assets FLOW STATEMENT Meaning The term â€Å"Flow† implies change and accordingly, 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 lessening 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 occur. 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 per the International Accounting Standard 7, the term ‘Fund’ alludes to money, to money and money equal, or to working capital. The term ‘flow’ alludes to change and accordingly the term ‘Funds flow† alludes to ‘change in funds’ or ‘change in working capital’. At the end of the day, any expansion or decline 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 speculations |Unclaimed profits | |Pre-paid costs |Provision for taxation* | |Outstanding livelihoods |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 obligation: when there is no annual assessment paid or extra arrangement made it is treated as present risk. We will compose a custom article 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 tends to be taken to timetable of changes in working capital. No further treatment is required. 2. Treated as non-current risk: A record account (Provision for tax collection a/c) is readied. Here and there we may need to show up at annual assessment paid during the year from the given data. *Proposed Dividend: It can be treated in two different ways: 1. Treated as present risk: Proposed profit might be taken as Current obligation since presentation 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 risk: Proposed profit can be taken as an allocation 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 tasks 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 generosity, 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 consumptions like fundamental costs, advertising| |Provision for tax collection |expenses. | |Provision for deterioration | |Capital save | |â | Non support Transaction: If the assets are Rs. 10000 and a fixed resource of Rs. 5000 is bought by giving portion s of Rs. 000 the assets position won't change and subsequently this exchange will be taken as a non-support exchange. Accounting 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 hold |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 lenders |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 | |Outstan ding 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 autonomous exchanges are given beneath and the impact of every one of the exchange on stream of assets is resolved. 1. The organization acknowledges Rs. 20,000 from its borrowers. †¢ Debtors will diminish from Rs. 80,000â â â â â â â â â â â â â  toâ Rs. 60,000 †¢ Cash parity 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 by virtue of progress in working capital position. †¢ This exchange won't get any change the working capital since it is just transformation of one current resource into another present resource. 2. The organization pays to its loan bosses a total 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 lenders 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 credits 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 obligation which are not the constituents of working capital. 4. The organization recovers 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 parity 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 expand the W. C 6. The organization sells its structure having a book estimation of Rs. 50,000 for an aggregate 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 expand the W. C From the abovementioned, the accompanying general principles can be framed: 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. , loan bosses paid off in shares. †¢ Current liabilitie s and fixed asse