Accounting & Bookkeeping

glossaryTermPage.hero.prefix Funds Flow Statement?

A financial statement that shows the sources from which funds were obtained and the uses to which they were applied during a period.

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A Funds Flow Statement (also called Statement of Changes in Financial Position) analyzes changes in working capital between two balance sheet dates. It identifies where long-term funds came from (operations, new loans, share issues, asset sales) and where they went (asset purchases, loan repayments, dividends). Unlike a Cash Flow Statement (which tracks actual cash), Funds Flow uses the concept of 'working capital' (current assets minus current liabilities). It's less common now as Ind AS/IFRS mandate Cash Flow Statements, but remains important for understanding long-term financial decisions.

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Sources of Funds = Funds from Operations + New Long-term Borrowings + Share Capital Issued + Sale of Fixed Assets | Uses of Funds = Purchase of Fixed Assets + Loan Repayment + Dividends Paid + Tax Paid

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Company's fund flow for FY2025: Sources — Profit ₹20,00,000, Term loan ₹50,00,000, Sale of old machinery ₹5,00,000 = ₹75,00,000. Uses — New plant ₹60,00,000, Loan repayment ₹8,00,000, Dividends ₹5,00,000 = ₹73,00,000. Net increase in working capital: ₹2,00,000.

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What is the difference between Funds Flow Statement and Cash Flow Statement?

Funds Flow tracks changes in WORKING CAPITAL (current assets – current liabilities) and focuses on long-term financial decisions. Cash Flow tracks actual CASH movements categorized as Operating, Investing, and Financing activities. Cash Flow is mandatory under Ind AS; Funds Flow is optional but useful for working capital analysis.

Is Funds Flow Statement still relevant today?

While not mandatory under current accounting standards (replaced by Cash Flow Statement for statutory reporting), it remains valuable for: bank loan analysis (lenders assess fund utilization), working capital management, long-term financial planning, and academic understanding of how businesses are funded.

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