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What is a Fund Flow Statement?

What is a Fund Flow Statement?
The art and science of accounting has developed several conceptions and terminologies, which are being applied by many companies worldwide, in their day-to-day operations, as well as in the preparation of their financial statements. A fund flow statement is one such document that records the inflow and outflow of cash in a given period.
Scholasticus K
Last Updated: May 31, 2018
The accounts and finance departments of companies worldwide are constantly churning out records of past and present transactions. The ledger rooms of such companies always summarize and present such recorded transactions to management members on a daily, weekly, and monthly basis. They play a significant role in helping the management make right decisions, at the right time. The concept of preparing financial statements is not new, and the timeline can be traced back to the 13th century, when the Italian accountant, Amatino Manucci, started summarizing transactions from his ledger books. In today's world, we call these summaries as statements.
A fund flow and cash flow statement are one and the same. There is no difference between the two, except their names. It can be defined as "the financial statement that summarizes and reveals essential changes in cash and cash equivalent elements of a balance sheet, that have occurred in the past or current accounting year". The International Accounting Standard 7 (IAS 7) gives a more comprehensive and specified definition of it along with the prescribed manner in which the statement can be calculated.
Elements Involved
Preparing such a statement is quite easy; all you need is a balance sheet and the appropriate pro forma. The following is a small pro forma that will help illustrate the point better.
(+/-/total) Particulars Amount
1. Cash flows from operating activities
(+) Cash receipts from customers xx
(-) Cash paid to suppliers and employees xx
(+) Income from operations xx
(-) Interest paid xx
(-) Income taxes paid xx
(Total) Net cash flows from operating activities xx
2. Cash flows from investing activities
(+) Proceeds from the sale of assets xx
(-) Dividends received xx
(Total) Net cash flows from investing activities xx
3. Cash flows from financing activities
(-) Dividends paid xx
(-) Net cash flows used in financing activities xx
(Total) Net increase in cash and cash equivalents xx
(+) Cash and cash equivalents balance brought down (at the beginning of year) xx
(Total) Cash and cash equivalents balance carried down (at the end of year) xx

The basic intention of making such statements is to provide management personnel with appropriate figures of income and expenditures. The fund flow analysis is a crucial aspect of what is known as balance sheet analysis. The statement in the balance sheet and annual report of companies often informs investors about the performance of the company. Many people, who consider a single balance sheet as a misleading document, consult this statement to clarify their doubts regarding the inward and outward cash flows of the year.
In some companies, where the organization is engaged in per unit production, departments make use of this analysis to derive the daily output of one production unit. 'Depiction of monetary figures' is of utmost importance; however, ignorance of reputation, human quality, accuracy, and quality of work often makes this statement, a document with certain limitations.