Define The Terms 'fund' And 'flow' In The Context Of The Funds Flow Statement. How Is A Funds Flow Statement Prepared?
The term ‘Fund’ has been assigned different meanings by different people. In narrow sense ‘Funds’ means cash and Bank balance. To many people funds is nothing but having the net effect of various business events on the basis of cash. This explains the trend towards the preparation and presentation of "Cash Flow Statement" in published report of accounts. Funds = Current Assets – Current Liabilities = Working Capital Meaning of the term ‘Flow’: - The term ‘Flow’ means change. Therefore flow of funds means change in working capital. The change in funds may be either positive or negative. It may be inflow of funds or outflow of funds.
