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Funds flow statement is one of the important tools, which is used in many ways. It helps to understand the changes in the financial position of a business enterprise between the beginning and ending financial statement dates. It is also called as statement of sources and uses of funds. Institute of Cost and Works Accounts of India, funds flow statement is defined as a statement prospective or retrospective, setting out the sources and application of the funds of an enterprise. The purpose of the statement is to indicate clearly the requirement of funds and how they are proposed to be raised and the efficient utilization and application of the same" t2 Cash flow statement is a statement which shows the sources of cash inflow and uses of cash out flow of the business concern during a particular period of time. It is the statement, which involves only short-term financial position of the business concern. Cash flow statement provides a summary of operating, investment and financing cash flows and reconciles them with changes in its cash and cash equivalents such as marketable securities, Institute of Chartered Accountants of India issued the Accounting Standard (AS-3) related to the preparation of cash flow statement in 1998 Difference Between Funds Flow and Cash Flow Statement Funds Flow Statement Cash Flow Statement 1. Funds flow statement is the report on the 1. Cash flow statement is the report showing movement of funds or working capital sources and uses of cash. 2. Funds flow statement explains how working 2. Cash flow statement explains the inflow and capital is raised and used during the particular out flow of cash during the particular period, 3. The main objective of tund flow statement is 3. The main objective of the cash flow statement to show the how the resources have been is to show the causes of changes in cash balanced mobilized and used. between two balance sheet dates. 4. Funds flow statement indicates the results of 4. Cash flow statement indicates the factors current financial management. contributing to the reduction of cash balance in spite of increase in profit and vice-versa. 5. In a funds flow statement increase or decrease 5. In a cash flow statement only cash receipt and working capital is recorded. payments are recorded. 6. In funds flow statement there is no opening 6. Cash flow statement starts with opening cash and closing balances. balance and ends with closing cash balance. Exercise 4 From the following balance sheet of A Company Ltd, you are required to prepare a schedule of changes in working capital and statement of flow of funds. Balance Sheet of A Company Ltd., as on 31" March Liabilities 2004 2005 Assets 2004 2005 Share Capital 1,00,000 1.10.000 Land and Building 60,000 60,000 Profit and Loss a/c 20,000 23,000 Plant and Machinery 35,000 45,000 Loans 10,000 Stock 20,000 25,000 Creditors 15,000 18,000 Debtors 18,000 28,000 Bills payable 5,000 4,000 Bills receivable 2.000 1.000 Cash 5.000 6.000 1,40,000 1,65,000 1.40.000 1.65.000

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