Fund Flow Statement

The accounts and finance departments of companies worldwide are constantly churning out records of past, present and transactions. The ledger rooms of such companies always summarize and present such recorded transactions to management members on a daily, weekly and monthly basis. These recorded translations play an extremely important role in helping the management take right decisions at the right time. The convection of preparing financial statements is not new and the timeline can be traced back to 13th century, when Italian Amatino Manucci started summarizing transactions from his ledger books. In today's world, we call these summaries as statements.

What are Fund Flow Statements

A fund flow or cash flow statement are basically one and same. There is no difference between the two, except for their names. The statement for fund flow can be defined as "...the financial statement that summarizes and reveals essential changes of cash and cash equivalent elements of a balance sheet, that have changed in the past or current accounting year." The International Accounting Standard 7, gives a more comprehensive and specified definition of the cash flow statements as well as the prescribed manner in which the statement can be calculated.

Elements of a Fund or Cash Flow Statement

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 provide management personnel with appropriate figures of income and expenditures. The analysis of a fund or cash flow statement is a crucial aspect of what is known as a balance sheet analysis. The statement in the balance sheet and annual report of companies often informs the investors of 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 use the analysis of cash flow to derive the daily output of one production unit, be it a man or a machine. 'Depiction of monetary figures' is of utmost importance and, ignorance of reputation, human quality, accuracy and quality of work, often make this statement a document with certain limitations.

Economists, financial experts and chartered accountants and auditors, have criticized and advocated the use of this statement. But by the end of the day, when the CEO's secretary hands in the flow statement for that day, it becomes nothing but a blunt fact that states a monetary truth for the day. Sometimes it makes me wonder, why do we measure an operation only from the point of view of a money? How is sincerity and efforts of a machine-loving engineer, sweating workman and pondering accountant measured?