Fund Flow Statement
While a cash flow statement tracks cash, a fund flow statement tracks movements in working capital (current assets minus current liabilities) between two balance sheet dates. It answers the question: where did long-term funds come from and where were they used? It is still popular in Indian commerce courses and for analysing proprietorship and partnership accounts.
Two parts
- Schedule of Changes in Working Capital: compare each current asset and current liability at the two dates. An increase in a current asset or decrease in a current liability increases working capital; the reverse decreases it.
- Statement of Sources and Applications of Funds: Sources include funds from operations (net profit adjusted for depreciation and other non-fund items), fresh capital or loans, and sale of fixed assets. Applications include purchase of fixed assets, repayment of loans, drawings, dividend and tax paid.
Check: Total sources − total applications = net increase (or decrease) in working capital.
How this tool works
Enter opening and closing figures of current assets and current liabilities, then list long-term sources and applications. The tool prepares both schedules in the standard format, verifies that the two agree and highlights any difference. Download as PDF or Excel.
Worked example
Current assets rise from ₹4,55,000 to ₹5,43,000 and current liabilities change from ₹2,42,000 to ₹2,33,000, so working capital increases from ₹2,13,000 to ₹3,10,000 — an increase of ₹97,000. Sources: funds from operations ₹3,10,000, loan raised ₹2,00,000, asset sale ₹47,000 = ₹5,57,000. Applications: fixed assets ₹2,50,000, loan repaid ₹90,000, drawings ₹1,20,000 = ₹4,60,000. Sources − applications = ₹97,000, equal to the increase in working capital — the statement agrees.
Computing funds from operations
Start with net profit, add back depreciation, goodwill or preliminary expenses written off, loss on sale of assets and provision for tax/dividend if treated as non-current; deduct profit on sale of assets and non-operating incomes.
Frequently Asked Questions
How is a fund flow statement different from a cash flow statement?
Fund flow measures changes in net working capital between two dates; cash flow measures changes in cash and cash equivalents and is the statement required by accounting standards today.
Is depreciation a source of funds?
Not by itself, but because it was deducted in arriving at net profit without using funds, it is added back when computing funds from operations.
Why does my statement not agree?
Usually funds from operations is mis-computed, or a non-current change (for example a loan repayment or asset purchase) was omitted from sources/applications.
Is a fund flow statement mandatory?
No. It is an analytical tool; companies must present a cash flow statement instead.
Disclaimer: This tool is for general information and estimation only. Tax rates and rules change — verify with official sources or a professional before acting. Read full disclaimer.