Prepare a fund flow statement from the following information:
An overview of the funds from operations is shown as follows:
| Net profit before writing off goodwill | $10,750 |
| Add: Depreciation | $1,750 |
| $12,500 |
In turn, the fund flow statement can be prepared as follows:
| Sources of Funds | $ | Application of Funds | $ |
| Income from operations | 12,500 | Payment of dividend | 3,500 |
| Issue of share capital | 5,000 | Purchase of machinery | 10,000 |
| Increase in working capital | 4,000 | ||
| 17,500 | 17,500 |
Prepare a fund flow statement from the balance sheet of John Trading Co. for the year 2024-25.
John Trading Co. Balance Sheet For the year 2024-25
| 2024 | 2025 | 2024 | 2025 | ||
| $ | $ | $ | $ | ||
| Share capital | 500,000 | 650,000 | Goodwill | 20,000 | 15,000 |
| Share premium | 50,000 | - | Investments | 150,000 | 200,000 |
| P & L A/c | - | 25,000 | Fixed Assets | 550,000 | 550,000 |
| Debentures | 200,000 | - | Debtors | 60,000 | 40,000 |
| Bank overdraft | 80,000 | 100,000 | Stock | 120,000 | 80,000 |
| Creditors | 60,000 | 75,000 | Cash | 12,000 | 5,000 |
| Proposed dividend | 10,000 | 15,000 | Prepaid | - | - |
| Provision of tax | 20,000 | 25,000 | Expenses | 8,000 | - |
| 920,000 | 890,000 | 920,000 | 890,000 |
The following information is also given:
| $ | ||
| Net profit | 63,000 | |
| Less: Income tax dividend provision | 23,000 + 15,000 | 38,000 |
| Add: Depreciation (Fixed Assets) | 80,000 | 25,000 |
| Goodwill written off 5,000 | 5,000 | 85,000 |
| Proposed tax 23,000 + Proposed dws 15,000 | 38,000 | |
| 148,000 |
Change in Working Capital
| Current assets (Dr.) | $ Increase | $ Decrease |
| Drs. | 20,000 | |
| Stock | 40,000 | |
| Cash | 7,000 | |
| Prepaid expenses | 8,000 | |
| Current liabilities | ||
| Bank overdraft | 20,000 | |
| Crs. | 15,000 | |
| Decrease in working capital | 110,000 |
Proposed Dividend
| $ | $ | ||
| To bank | 10,000 | By balance b/d | 10,000 |
| To c/d | 15,000 | By P & L | 15,000 |
| 25,000 | 25,000 |
Proposed Income Tax
| $ | $ | ||
| To balance c/d | 25,000 | By balance b/d | 20,000 |
| To bank | 18,000 | By P & L | 23,000 |
| 43,000 |
Fixed Assets
| $ | $ | ||
| To b/d | 550,000 | By depreciation | 80,000 |
| To bank | 80,000 | By balance c/d | 550,000 |
| 630,000 | 630,000 |
Fund Flow Statement
| Sources of Funds | $ | Application of Funds | $ |
| Share capital (50,000 bonus shares out of premium) | 100,000 | Deb. redemption | 200,000 |
| Income from operations | 148,000 | Tax paid | 18,000 |
| Decrease in working capital | 110,000 | Dividend paid | 10,000 |
| Investment purchased | 50,000 | ||
| Fixed assets purchased | 80,000 | ||
| 358,000 | 358,000 |
A fund flow statement reveals the periodic increase or decrease in a business enterprise’s funds.
An accounting balance sheet is a financial document that shows the relationship between a company’s assets, liabilities, and shareholder equity at a particular point in time.
A Debenture is a debt vehicle that is backed solely by the credit worthiness of the issuer.
Current liabilities are short-term financial obligations that are due either in one year or within the company’s operating cycle. Current liabilities are different from long-term liabilities, which refer to debts or obligations that are due in more than a year.
Unexpired or prepaid expenses are the expenses for which payments have been made, but full benefits or services have yet to be received during that period.
About the Author
True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.
True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.
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