Following are Steps to Make Fund Flow
Step 1 Get Balance Sheet of atleast 2 years on Same Excel Sheet in Comparison format
Example
Download & Try
Step 2 Finding Long Term and Short Term Items in Balance Sheet
Items In Balance Sheet are of 2 types
Long Term
and
Short Term
What are Long Term Items?
All Items of Balance Sheet except Current Assets and Curent Liabilities are Long Term Items
What are Short Term Items?
Only Current Assets and Curent Liabilities are Short Term Items
Example
In above Balance Sheet,Figures Colored Red are Short Term Items and those in Black are Long Term Items
Step 3 Find Long Term Sources, Long Term Uses and Long Term Surplus/Deficit
How to Determine Sources and Uses of Funds?
Case |
Source/ Use |
If Liability Increase |
Source |
If Liability Decrease |
Use |
If Assets Increase |
Use |
If Assets Decrease |
Source |
Suppose in our Balance Sheet
Following are Long Term Sources and Uses
Long Term Surplus (Deficit)
Suppose Total Long Term Sources are 10000 and Total Long Term Uses are 7000,
Then Long Term Surplus=3000
Suppose Total Long Term Sources are 10000 and Total Long Term Uses are 11000,
Then Long Term Deficit=1000
In our example above:-Total Long Term Sources are 5000 and Total Long Term Uses are 6500,
Then Long Term Deficit=1500
Step 4 Similarly Find Short Term Sources, Short Term Uses and Short Term Surplus/Deficit
Same Rules are to be followed for Short Term
If Liability Increase |
Source |
If Liability Decrease |
Use |
If Assets Increase |
Use |
If Assets Decrease |
Source |
Example
Note:-Some people take Total Current Assets and Current Liability to determine Short Term Sources and Used
Example
Step 5 Check by Calculating Net Surplus
Net Surplus is the total of Long Term and Short Term Surplus/ Deficit
If Net Surplus is 0, It means we have prepared Fund Flow Correctly
Suppose there is Long Term Surplus of 400,there will be Short Term Deficit of (400)
Net Surplus=400+(400)=400-400=0
Suppose there is Long Term Deficit of (600),there will be Short Term Surplus of 600
Net Surplus=(600)+600=-600+600=0
If Net Surplus is not coming to 0,it means there is some mistake
Suppose in our Example, Net Surplus=0(-1500+1500) as shown below
This is our Final Fund Flow Statement