Funds stream declaration reveals the changes in the financial position between two balance sheet dates. It represents the motion of funds and the motion can be inward called as income or invoices. In case of outward movement, it is represented by expenditure or payments.
The term, “funds” has various meanings. In the context of funds circulation statement “funds” means the net working capital. Flow of funds means modifications in funds position of changes in working capital.
Operating capital refers to that part of capital which is required for meeting the needs of existing operations.
There are two ideas of working capital, namely gross working capital and net working capital.
Gross working capital describes total investment in present assets. Net working capital means of excess of current properties over existing liabilities. Deals including a repaired asset/liability on the one hand and an existing asset/liability on the other hand outcome in modifications in working capital. Deals within the exact same category will not lead to modification in working capital.
A funds flow statement is a declaration which explains the different sources from which funds were raised and the usages to which these funds were put. There are three steps associated with the preparation of funds circulation statement. They are i) preparation of schedule of modifications in working capital 2) estimation of funds from operation and 3) preparation of funds circulation statement. While preparing schedule of modifications in working capital, we need to take just present items viz., current properties and current liabilities; and while determining funds from operations we have to at first arrive at the net profit/loss.
Later on we need to adjust the items which do not include outflow of funds and the products which are currently debited to profit and loss account. Non fund or non operating items which have actually already been credited to benefit and loss account must also to be adjusted. Funds stream statement reveals the sources from which extra funds are gotten and the usages to which these sources are made use of. Funds from operations, problem of share capital, debentures, long term loans from banks and banks, sale earnings of fixed assets are important sources of funds.
Repayment of long term loans and debentures, repayment of preference share capital, payment of dividends, and acquisition of fixed assets are the important application of funds. Funds flow statement help the management accountant, financial analyst and creditors in many ways. By using the funds flow statement they are able to ascertain the ways in which the funds are utilized as well as the ways by which the funds are obtained. This in fact provides them insight towards improving the profitability position of the firm to a great extent.
References:
http://classof1.com/homework-help/accounting-homework-help/
Remember! This is just a sample.
You can get a custom paper by one of our expert writers.
Get your custom essay
Helping students since 2015
Essay Writing Service Features
Our Experience
No matter how complex your assignment is, we can find the right professional for your specific task. Contact Essay is an essay writing company that hires only the smartest minds to help you with your projects. Our expertise allows us to provide students with high-quality academic writing, editing & proofreading services.
Free Features
Free revision policy
$10Free bibliography & reference
$8Free title page
$8Free formatting
$8How Our Essay Writing Service Works
First, you will need to complete an order form. It's not difficult but, in case there is anything you find not to be clear, you may always call us so that we can guide you through it. On the order form, you will need to include some basic information concerning your order: subject, topic, number of pages, etc. We also encourage our clients to upload any relevant information or sources that will help.
Complete the order form
Once we have all the information and instructions that we need, we select the most suitable writer for your assignment. While everything seems to be clear, the writer, who has complete knowledge of the subject, may need clarification from you. It is at that point that you would receive a call or email from us.
Writer’s assignment
As soon as the writer has finished, it will be delivered both to the website and to your email address so that you will not miss it. If your deadline is close at hand, we will place a call to you to make sure that you receive the paper on time.
Completing the order and download
