Steps in Preparation of Fund Flow Statement
It is divided into three parts which consist of,
It is used in finding out any increase or decrease in working capital. The formula is denoted as
TCA – TCL = WC
Where TCA is Total Current Assets, and TCL is Total Current Liabilities.
An increase or decrease has to be found out after calculating working capital.
It can be found out by two methods. One is through statement method, and the other is via accounting method.
The easier of the two methods is accounting method. It is better that we use it for finding fund from operation.
There are two places where you can see all the adjustments. The application side will be in the adjustment section on left-hand side whereas the debited side appears in the treatment section onright-hand side.
Preparation of a separate ledger is necessary if the information related to adjustment is about assets or liability items. It is also necessary because balances from this ledger can be transferred to fund flow statement.
Handling provision for taxation and proposed divider appears under the statement of working capital. Many times during taxation provision, you can find the information on the adjustment. Due to this reason, it is treated a non-current liability.
Treatment of Taxation Provision
With the provided Income tax in the adjustment we can find the paid tax by,
Income Tax A/c credit
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