After ascertaining the increase or decrease in net working capital and funds or loss from operation, the next step is to prepare the funds flow statement. The purpose of preparing the funds flow statement is to know about the funds obtained and used by the firms. The funds flow statement has two sides. On the left hand side, the sources of funds are shown and on the right hand side, the uses or applications of funds are shown.
Sources Amt Applications Amt
Funds from operation ...................................xxx........Increase in working capital...........xxx
Decrease in working capital.....................xxx.........Loss from operation....................xxx
Issue of share............................................xxx.....Redemption of preference share......xxx
Issue of debenture....................................xxx..........Redemption of debenture............xxx
Increase in long term liabilities................xxx.........Purchase of fixed assets...............xxx
Sales of fixed assets...................................xxx..........Investment made.........................xxx
Sale of long term investment....................xxx.....Repayment of long term liabilities... xxx
non trading receipt....................................xxx..........Non trading payment...................xxx