Balance Sheet vs.

Fund Flow
Statement
Balance sheet: Fund Flow Statement:
1. Prepared to know the financial 1. Prepared to know the total
position. sources and their uses in a
2. Prepared on the basis of year.
different accounts in ledger. 2. Prepared with the help of
3. Shows the assets and balance sheets of two
liabilities, it’s a static consecutive years.
statement. 3. It reveals the changes in the
4. Useful for all, i.e. value of Fixed Assets and their
Management, Shareholders, effect on flow of funds.
Creditors, Outsiders and Govt. 4. Useful for internal financial
agencies etc. management.
5. CA and CL are shown item 5. CA and CL are used to find out
wise. increase or decrease in
6. Its preparation is a statutory working capital.
obligation and as per 6. Its preparation is at the
prescribed format. discretion of the management.
Income Statement vs. Fund Flow
Statement
Income Statement: Fund Flow Statement:
1. Obj. is to ascertain the 1. Obj. is to ascertain the funds
profit/loss by the company out generated from operations. It
of business operations at the reveals the sources of funds
end of particular year. and their applications.
2. Prepared on the basis of 2. Prepared with the help of
nominal accounts of particular balance sheets of two
accounting period. consecutive years.
3. Uses only income and 3. Takes into a/c not only funds
expenditure transactions available from trading
relating to trading operations of operations but also funds
particular period. available from other sources
like issue of share
4. Preparation of P&A A/c is a
capital/debentures, sale of fixed
statutory obligation keeping assets etc.
align with legal requirement.
4. Its preparation is at the
discretion of the management.
5. Income statement can be 5. Income statement is one of
prepared without help of a
Fund Flow Statement. the source documents in
6. It is static statement. preparation of funds flow
7. Prepared only at the end of statement.
accounting period for the 6. It may be prepared much
period covered.
8. Prepared on accrual basis before business operations
and fails to present the and act as an instrument of
factual position. planning and control.
9. The determination of periodic
income is necessarily based 7. Provides a complete record
on number of estimates, of transactions involving
judgment and allocations and cash.
is subject to manipulations of
management 8. It can be easily manipulated
Preparation of Fund Flow Statement
I. The whole items of the Balance Sheet are
Classified into the following four
categories:
1. Non Current Liabilities

2. Non Current Assets

3. Current Liabilities

4. Current Assets
 Balance Sheet
Non Current Liabilities: Current Liabilities:
Equity share Capital *** Land ***
Preference Share Capital *** Building ***
Reserves and Surplus *** Plant & Machinery ***
Debenture *** Furniture & Fittings***
Long Term Loans *** Vehicles ***
Patents ***
Trade Marks ***
Goodwill ***
Preliminary Exp. ***
P&L A/c (Dr.) ***
(A) #### (A) ####
Current Liabilities: Current Assets:
Trade Creditors *** Inventories ***
Bank Overdraft *** Trade Debtors ***
Bills Payable *** Bills Receivable ***
Provisions against CL *** Cash and Bank Bal. ***
Investments (Temporary) *** Loans and Advances ***
(B) #### (B) ####
(A+B) ##### (A+B) #####
II Prepare Statement of Sources
and Application of Funds
(A) Sources of Funds
Funds from Operations ***
Issue of Share Capital ***
Raising of Long Term Loans ***
Receipts from partly paid share, ***
Called up
Sales of non-current (fixed) assets ***
Non-trading receipts, div. received ***
Sale of investments (long term) ***
Decrease in working capital (CA-CL) ***
####
(B) Application of Funds
Funds lost in Operations ***
Redemption of Pref. share capital ***
Redemption of Debenture ***
Repayment of Long Term Loans ***
Purchase of Non-current Assets ***
Purchase of long-term investment ***
Non Trading Payments ***
Payment of Dividends* ***
Payment of Tax* ***
Increase in Working Capital (CA-CL) ***
####
* Only if are Appropriation of Profits and Not Current
Liabilities
III Sources of funds:
The funds inflow into the organization will come from
the following sources:
Funds generated from the operations-
During the course of trading activity, a company
generates revenue mainly in the form of sale
proceeds and paid out for costs. The difference
between these two items will be the amount of funds
generated by the trading operations. The funds
generated from business operations are arrived at
after making the following adjustments:
Calculations of Funds Form Operations (Rs.)
Closing Balance of P&L A/c or Retained Earnings (As given in the ###
Balance sheet)
Add: Non-fund and Non-Operating Items, already Debited to P& L A/c ###
(a) Depreciation and Depletion
(b) Amortization of fictitious and intangible assets
Goodwill ***
Patents and trade marks ***
Preliminary Expenses ***
Discount on issue of shares, etc. ***
###
(c ) Appropriation of Retained Earnings, such as
Transfer to general reserve ***
Transfer to Dividend Equalization fund ***
Transfer to Sinking Fund ***
Transfer to Contingency Reserve, etc. ***
###
(d) Loss on sale of any Non-Current (fixed) assets such as:
Loss on sale of land and building ***
Loss on sale of machinery ***
Loss on sale of furniture ***
Loss on sale of long-term investments, etc. ***
###
(e) Dividends including:
Interim Dividend ***
Proposed dividend (if it is an appropriation of Profit ***
And not taken as current liability)
###
(f) Provision for taxation (if it is not taken as current liability) ###
(g) Any other non-fund/non-operating items which have been
Debited to Profit and Loss A/c ###
(A) #####
Less: Non-Fund and Non-Operating Items which have been
credited to P&L A/c
(1) Profit or Gain from the Sale of Non-Current (Fixed) assets such
as:
Profit on sale of land and building ***
Profit on sale of plant and machinery ***
Profit on sale of long-term investments, etc. ***
###
(2) Appreciation in the value of fixed assets, such as increase in the
value of Land if it has been credited to P&L A/c ###
(3) Dividends received ###
(4) Excess provision re-transferred to ###
P&L A/c or Written Off
(5) Any other non-operating item which has ###
been credited to P&L A/c
(6) Opening Balance of P&L A/c or Retained Earnings ###
(As given in the Balance sheet)
(B) ####
Funds Generated from Operations
(A-B) ####
IV Statement of Changes in
Working Capital
Particulars Beginning End Working Capital
of the Yr. of the Yr. Inc. Decrease
Current Assets
Cash in hand *** *** *** -
Cash at Bank *** *** *** -
Bills Receivable*** *** - ***
Sundry Debtors*** *** - ***
Closing Stock *** *** *** -
Short Term Invst.*** *** *** -
Prepaid Exp. *** *** *** -
Other CA *** *** - ***
(A) #### ####
Current Liabilities
Bills Payable *** *** *** -
Sundry Cre. *** *** - ***
Outstad’g Exp. *** *** - ***
Bank Overdraft *** *** - ***
Short Term Loans *** *** *** -
Proposed Dividend*** *** *** -
Provision of Tax *** *** - ***
Other CL *** *** *** -
(B) #### ####
Rules in Preparation of the
Funds Flow Statement are:
1. An Increase in an Asset over the year is an
Application of Fund.
2. A Decrease in an Asset over the year is a
Source of Fund.
3. A Decrease in a Liability over the year is an
Application of Fund.
4. An Increase in a Liability over the year is a
Source of Fund.
 Funds Flow Statement of
Reliance Industries Limited
Balance Sheet of Reliance Industries Ltd. (Rs.In Crore)
Particulars 31-3-2007 31-03-2008
Share Capital 1393.21 1453.39
Equity Share Suspense 60.14 -
Equity Share Warrants - 1682.40
Reserves and Surplus 62513.78 78312.8
Secured Loans 9569.12 6600.17
Unsecured Loans 18256.61 29879.51
Deferred Tax Liability 6982.02 7872.54
Current Liabilities 16856.53 21045.47
Provisions 1712.87 2992.62
117353.28 149838.9
Fixed Assets:
Gross Block 99532.77 104229.10
Less: Depreciation 35872.31 42345.47
63660.46 61883.63
Capital WIP 7582.13 23005.84
Investments 16251.34 22063.60
Current Assets:
Inventories 12136.51 14247.54
Sundry Debtors 3732.42 6227.58
Cash and Bank Balance 1835.35 4280.05
Other Current Assets 3.07 72.54
Loans and Advances 12206.00 18058.13
117353.28 149838.91
Schedule Showing Changes in
the Working Capital Position
Particular 31/3/07 31/03/08 WC
Inc. Dec.
Current Assets
Inventories 12136.51 14247.54 2111.03
Sundry Debtors 3732.42 6227.58 2495.16
Cash& Bank Bal. 1835.35 4280.05 2444.70
Other CA 3.07 72.54 69.47
Loans & Adv. 12206.00 18058.13 5852.13
29913.35 42885.84
Current Liabilities
Sundry Creditors 16467.24 20590.45 - 4123.21
Other CL 398.29 455.02 - 56.73
Provisions 1712.87 2992.62 - 1279.75
18578.40 24038.09
WCapital 11334.95 18847.75 -
Increase in WC 7512.8
18847.75 18847.75 12972.49
12972.49
Sources of Application of Funds of Reliance Industries Ltd. for the Yr.
End 31-03-2008 (Rs. In Crore)
Sources of Funds
Issue of Equity Share Warrants 1682.44
Unsecured Loans Raised 11622.90
Increase in Deferred Tax Liability 890.52
Funds from operations 15799.03
29994.89
Application of Funds
Repayment of Secured Loans 2968.95
Purchase of Investments 5812.26
Purchase of Fixed Assets 13700.88
Increase in Working Capital 7512.80
29994.89
Calculation of Funds from Oper. for the yr.
ended 31st March, 2008 (Rs. In Crore)
Cl. balance of Res.& Sur. 78312.81
Less: Op. balance of Res. and Sur. 62513.78
Funds Flow Operations 15799.03