Quick Summary
Diagram
Important Table
| Point | Meaning | Example / Use |
|---|---|---|
| Sources of Funds | Funds received | Issue shares, loans, sale of assets |
| Applications of Funds | Funds used | Purchase assets, repay loans |
| Working Capital Change | CA minus CL | Increase or decrease in working capital |
Best 10 Marks Answer
Fund Flow Statement is an important topic in Financial Reporting Statements and Analysis. It helps students and managers understand the financial health, performance and decision-making capacity of a business.
Fund flow statement shows changes in the financial position of a business by explaining sources and applications of funds during a period.
This concept is useful for investors, creditors, management, banks and other users of financial statements. It helps in comparing performance, identifying risk, measuring profitability and checking whether the business is financially stable.
For example, when a company’s financial statement is analysed, this concept helps to understand whether revenue is increasing, profit is sustainable, cash flow is strong and liabilities are under control.
Conclusion: Therefore, Fund Flow Statement is a useful tool for financial decision-making, business analysis, exam preparation and practical interpretation of financial statements.
Tips and Tricks to Remember
- ✅ Fund flow is based on accrual concept.
- ✅ Cash flow is more common today, but fund flow is useful conceptually.
- ✅ Explain sources and applications separately.
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