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Concept of Funds-Flow-Statement

It is emphasized again that ‘Statement of Changes in Financial Position’ is basically a funds-statement- a condensed report designed to furnish insights and clues as to the financial condition of a business by showing disposition of earning from operations and other financing. This statement shows the movement of funds into the firm’s ‘current-assets accounts’ from external sources such as shareholders, creditors, sale of fixed asset sand customers. It also shown the movement of the funds to meet the firm’s obligations e.g., to pay dividends, redeem long term  loans, purchase of fixed assets, make up losses etc. in addition, movements in non-working capital accounts are also reported. Thus SCFP shows the changes which have taken place in the financial structure much more clearly than would be indicated by a comparison of the balance sheet at the beginning of the period with that at the end of the period.

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