23 August 2013
From cash flow in practicle life also you come to know where cash in flowing in wards and outwards activity wise for management analysis purpose and for taking relevant business decision. Fund flow is used for internal analysis by finance dept where exactly and how funds are being used for co.
07 September 2013
Cash flow statements and projections express a business's results or plans in terms of cash in and out of the business, without adjusting for accrued revenues and expenses. The cash flow statement doesn't show whether the business will be profitable, but it does show the cash position of the business at any given point in time by measuring revenue against outlays.
The cash flow statement should be prepared on a monthly basis during the first year, on a quarterly basis for the second year, and annually for the third year. The following 17 items are listed in the order they need to appear on your cash flow statement:
Cash refers to cash on hand in the business. Cash sales are income from sales paid for by cash. Receivables is income from the collection of money owed to the business resulting from sales. Other income is income from investments, interest on loans that have been extended, and the liquidation of any assets. Total income is the sum of total cash, cash sales, receivables and other income. Material/merchandise is the raw material used in the manufacture of a product (for manufacturing operations only), the cash outlay for merchandise inventory (for merchandisers such as wholesalers and retailers), or the supplies used in the performance of a service. Direct labor is the labor required to manufacture a product (for manufacturing operations only) or to perform a service. Overhead is all fixed and variable expenses required for the operations of the business. Marketing/sales is all salaries, commissions and other direct costs associated with the marketing and sales departments. R&D is labor expenses required to support the research and development operations of the business. G&A is labor expenses required to support the general and administrative functions of the business. Taxes are all taxes, except payroll, paid to the appropriate government institutions. Capital represents the capital requirements to obtain any equipment needed to generate income. Loan payments are the total of all payments made to reduce any long-term debts. Total expenses are the sum of material, direct labor, overhead expenses, marketing, sales, R&D, G&A, taxes, capital and loan payments. Cash flow is the difference between total income and total expenses. This amount is carried over to the next period as beginning cash. Cumulative cash flow is the difference between current cash flow and cash flow from the previous period.
Definition of fund flow
flow of fund is just like circulation of blood . Like circulation of blood , fund flow should come in business and go from business.
flow of fund here means conversation of one asset to be use to purchase of another asset or use to deduction in liabilities .
Definition of fund flow statement
fund flow statement is a statement which shows source and use of fund in particular time. This period may be two years or more years .Basis of making fund flow statement is two years or more than two years balance sheet .
Procedure for preparing fund flow statement
For making fund flow statement , we took three steps
1st step
1 making shedule or statement of change working capital
2nd step
2 making adjusted profit and loss account or statement showing fund from operation or lost in operation
3rd Step
fund flow statement
shedule of changing working capital proforma
particular previous year current year increase working capital decrease in w/c
a b c d
current asst. Rs. 5000 Rs.10000 Rs 5000 ---
current liabilities 4000 5000 1000
Working capital
C.A-C.L. 1000 5000 5000 10000
Net increase in
working capital c-d =5000-1000 =4000
See adjusted profit and loss account in picture of my hand written notes
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