(because who doesn’t want to know where the money comes from and where it goes, right?)
Ah, money! The pesky little thing can make your dreams come true or make you break out in a cold sweat at 2 a.m. when you realize your cash flow is, well, more like a cash trickle. Welcome to the world of the Sources and Applications of Funds statement — or, as the cool accountants like to call it, the funds flow statement.
What the Heck is a Funds Flow Statement? 🤔
Imagine you’re throwing a grand office party (confetti everywhere 🥳). Before the joyous event, you need to figure out two important questions: where the fund-billions are coming from, and more importantly, where they are going (hopefully not down the corporate chocolate fountain!).
That’s exactly what a business does with a funds flow statement. It essentially describes how a business raised and used its funds over a specified period, usually divided into two fabulous categories:
-
Sources of Funds: The glamorous ways businesses bring in the moolah!
- Trading profits 🌟
- Issues of shares or loan stock 📈
- Sales of fixed assets 💰
- Borrowings (hello, bank loans!) 💳
-
Applications of Funds: The equally fabulous ways businesses wave goodbye to said moolah!
- Trading losses 💸
- Purchases of fixed assets 🏠
- Dividends paid 🤑
- Repayment of borrowings 🏦
A Funds Flow Visual Extravaganza 📊
Let’s make sense of all these dry details with a splash of art. Here’s a simple diagram to make your accountant heart sing!
graph TD
A[Funds Flow Statement] -->|Source of Funds| B(Trading Profits)
A -->|Source of Funds| C(Issues of Shares)
A -->|Source of Funds| D(Sales of Fixed Assets)
A -->|Source of Funds| E(Borrowings)
A -->|Application of Funds| F(Trading Losses)
A -->|Application of Funds| G(Purchases of Fixed Assets)
A -->|Application of Funds| H(Dividends Paid)
A -->|Application of Funds| I(Repayment of Borrowings)
How It’s All Put Together 🧩
To give you a glimpse of the mathematical wonder that goes into creating this statement, here’s a quick formula. Think of it as the secret sauce in Aunt Mabel’s famous potato salad but juicier.
div!!!
move all content from into
Sources of Funds - Applications of Funds = Change in Working Capital
Voilà! Your cash may now breathe easy.
The Evolution: Funds Flow to Cash Flow 📈💰
In the UK accounting practice, the funds flow statement might now be chilling out in retirement. It’s been replaced by its younger, hipper cousin — the cash flow projection. Think of it like swapping your flip phone for a slick new smartphone. Yes, it’s better, faster, and can order you Uber Eats!
Quiz Time: Test Your Money Mojo! 📝
What’s the fun of learning without a little quiz to test if you’ve retained any of this sparkling wisdom? (Spoiler: You get bragging rights!)
