A financial statement showing the sources from which funds were obtained and the uses to which they were applied during a period, focusing on working capital changes.
A Fund Flow Statement analyzes changes in a company's financial position between two balance sheet dates by identifying where funds (working capital) came from and where they went. Sources include: net profit, depreciation (non-cash expense added back), sale of assets, new loans/equity, and decrease in working capital. Uses include: net loss, purchase of assets, repayment of loans, dividends paid, and increase in working capital. While the Cash Flow Statement (required under Ind AS 7) has largely replaced it in statutory reporting, the Fund Flow Statement remains useful for internal analysis, particularly for understanding long-term financial changes and working capital management. It provides a different perspective than cash flow by focusing on working capital rather than just cash.
Sources: Net Profit ₹5,00,000 + Depreciation ₹2,00,000 + Term Loan ₹10,00,000 = ₹17,00,000. Uses: Machinery purchased ₹12,00,000 + Loan repaid ₹3,00,000 = ₹15,00,000. Net increase in Working Capital: ₹2,00,000 (₹17L − ₹15L).
Ensures accurate financial reporting and record-keeping
Helps maintain regulatory and tax compliance
Enables better-informed business decisions
Improves operational efficiency and cash flow management
Cash Flow Statement tracks only cash movements (cash and cash equivalents). Fund Flow Statement tracks working capital changes (current assets minus current liabilities). Cash flow is mandatory under Ind AS/IFRS; fund flow is used for internal analysis. Cash flow has three sections (operating, investing, financing); fund flow has two (sources and uses).
While not required for statutory reporting (replaced by cash flow statement under Ind AS 7), it remains valuable for: bank loan appraisal (banks analyze fund flow for working capital finance), internal management decisions, long-term financial planning, and academic/professional exams (CA, CMA).
The net amount of cash and cash equivalents moving into and out of a business during a specific period.
The difference between a company's current assets and current liabilities, representing the short-term liquidity available for day-to-day operations.
A financial statement that shows a company's assets, liabilities, and equity at a specific point in time.
Formal records of a business's financial activities, comprising the Balance Sheet, Profit & Loss Statement, Cash Flow Statement, and Notes to Accounts.
Let Laabam.One handle the complexity. From invoicing to GST filing, our ERP software makes accounting effortless.