When it is about financial analysis, the role of balance sheet and standard concept of gain or loss in an account are very restricted. Mirroring the result of a business action, this profit or loss in an account is a record for a specific duration. The reflection only showcases sustainable expenses and the earnings which were acquired during the accounting period.
One can find the summarization of liabilities and assets in a balance sheet of a particular period. But it does not mean that this balance sheet gives a detailed explanation of the fund movement.
What really happens in general in a business concern is that the investment takes place in various ways through the funds which are received from different resources. This is the actual process which carries on.Financial management mainly focuses on maintaining the financial soundness and solvency of a company by studying and controlling the funds.
A different statement is an absolute necessity to find any periodical boost or decrease in funds of a firm. This statement is referred as fund flow statement whose purpose is to study the fund sources and its application over an accounting period.
Defining fund flow statement
It is a statement which is put together to analyse the causes of changes, i.e., an inflow and outflow of funds, that can be found on two different balance sheets.
Other terms of Fund Flow Statement
Statement of funds supplied and applied
Inflow-outflow of fund statement
Funds received and disbursed statement
A statement of sources and application of funds
Where Got and where Gone statement
A statement of sources and uses of funds
Administrative Utilisation of Fund Flow Statement
For a financial manager,fund flow statement is deemed as a helpful analytical tool which is used for serving the purpose of funds evaluation and also for accessing their sources.There are few essential administrative utilisations of fund flow statement which are described below.
In which ways were the funds used?
How much capital was accumulated?
Links of Previous Main Topic:-
Links of Next Finance Book Topics:-