{"id":8115,"date":"2023-06-30T13:56:53","date_gmt":"2023-06-30T08:26:53","guid":{"rendered":"https:\/\/razorpay.com\/learn\/?p=8115"},"modified":"2024-03-11T14:26:29","modified_gmt":"2024-03-11T08:56:29","slug":"fund-flow-statement","status":"publish","type":"post","link":"https:\/\/razorpay.com\/learn\/business-banking\/fund-flow-statement\/","title":{"rendered":"Know All About Fund Flow Statement\u00a0"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">The fund flow statement is a financial statement that records the inward and outward flow of business funds or assets. It identifies the reason for a change in the financial position of a company by comparing two years&#8217; balance sheets.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">This statement helps stakeholders understand how funds are generated and whether it has been utilised prudently. It provides insights into a company&#8217;s financing activities, investment decisions, and liquidity position, thereby assisting in financial analysis and decision-making.<\/span><\/p>\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_80 counter-hierarchy ez-toc-counter ez-toc-transparent ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-69d78c2062384\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-69d78c2062384\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/razorpay.com\/learn\/business-banking\/fund-flow-statement\/#What-is-a-Fund-Flow-Statement\" >What is a Fund Flow Statement?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/razorpay.com\/learn\/business-banking\/fund-flow-statement\/#How-are-Funds-Generated\" >How are Funds Generated?\u00a0<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/razorpay.com\/learn\/business-banking\/fund-flow-statement\/#What-is-the-Application-of-Funds\" >What is the Application of Funds?\u00a0<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/razorpay.com\/learn\/business-banking\/fund-flow-statement\/#Importance-of-Fund-Flow-Statement\" >Importance of Fund Flow Statement<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/razorpay.com\/learn\/business-banking\/fund-flow-statement\/#Top-Advantages-of-Fund-Flow-Statement\" >Top Advantages of Fund Flow Statement\u00a0<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/razorpay.com\/learn\/business-banking\/fund-flow-statement\/#Understanding-the-Analysis-of-Fund-Flow-Statement\" >Understanding the Analysis of Fund Flow Statement\u00a0<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/razorpay.com\/learn\/business-banking\/fund-flow-statement\/#Fund-Flow-Statement-vs-Cash-Flow-Statement\" >Fund Flow Statement vs Cash Flow Statement\u00a0<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/razorpay.com\/learn\/business-banking\/fund-flow-statement\/#FAQs\" >FAQs<\/a><\/li><\/ul><\/nav><\/div>\n<h2><span class=\"ez-toc-section\" id=\"What-is-a-Fund-Flow-Statement\"><\/span><b>What is a Fund Flow Statement?<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">A fund flow statement contains the reason for a change in working capital. It maintains inflows and outflows of businesses and offers information about the increase or decrease in a company&#8217;s financial metrics. It does so by comparing two different balance sheets. It focuses on the movement of funds within the organisation and helps in analysing the sources and uses of funds.<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"How-are-Funds-Generated\"><\/span><b>How are Funds Generated?\u00a0<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<ul>\n<li aria-level=\"1\"><b>Increase in Shareholders&#8217; Equity<\/b><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">Funds can be generated through issuing new shares or additional capital contributions by shareholders.<\/span><\/p>\n<ul>\n<li aria-level=\"1\"><b>Increase in Long-Term Liabilities<\/b><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">Companies can also raise funds by obtaining long-term debt, such as loans or bonds.<\/span><\/p>\n<ul>\n<li aria-level=\"1\"><b>Decrease in Working Capital\u00a0<\/b><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">Another way of generating funds is by reducing a company&#8217;s investment in current assets or by controlling current liabilities.<\/span><\/p>\n<ul>\n<li aria-level=\"1\"><b>Non-Operating Income\u00a0<\/b><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">Companies can also generate funds through non-operating activities, such as the sale of assets or investments.<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"What-is-the-Application-of-Funds\"><\/span><b>What is the Application of Funds?\u00a0<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<ul>\n<li aria-level=\"1\"><b>Cover Capital Expenditures\u00a0<\/b><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">Funds can be used for acquiring or upgrading long-term assets, such as property, plant, and equipment.<\/span><\/p>\n<ul>\n<li aria-level=\"1\"><b>Support Debt Repayment\u00a0<\/b><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">Another significant use of funds is to make repayment of long-term debt obligations, including principal and interest payments.<\/span><\/p>\n<ul>\n<li aria-level=\"1\"><b>Increase Working Capital\u00a0<\/b><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">Funds can be utilised to increase investment in current assets or to settle current liabilities.<\/span><\/p>\n<ul>\n<li aria-level=\"1\"><b>Pay Dividend and Make Distributions\u00a0<\/b><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">The company distributes funds among shareholders in the form of dividends or to owners in the case of partnerships or sole proprietorships.<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"Importance-of-Fund-Flow-Statement\"><\/span><b>Importance of Fund Flow Statement<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">The fund flow statement, also known as a statement of changes in financial position, is an important report that provides valuable information about sources and uses of funds. It analyses changes in a company&#8217;s financial position between two balance sheet dates. It does so by focusing on the movement of funds from one account to another.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">In addition, this statement helps in assessing the liquidity position of a business. Analysing the sources and uses of funds provides insights into how a company generates and utilises cash. It helps identify if a company is generating enough funds internally to meet its financial obligations, such as debt repayments, capital expenditures, and dividends.<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"Top-Advantages-of-Fund-Flow-Statement\"><\/span><b>Top Advantages of Fund Flow Statement\u00a0<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<ul>\n<li aria-level=\"1\"><b>Tracking Changes in Financial Position\u00a0<\/b><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">A fund flow statement allows stakeholders to track the ups and downs of a company&#8217;s finances over a specific period. It provides a comprehensive view of sources and uses of funds, highlighting the movement of cash or cash equivalents within an organisation.\u00a0<\/span><\/p>\n<ul>\n<li aria-level=\"1\"><b>Identifying Working Capital Management<\/b><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">This statement sheds light on a company&#8217;s working capital management. It provides in-depth information about changes in current assets and liabilities. Thus, highlighting how effectively a company manages its short-term resources. By analysing a fund flow statement, stakeholders can assess a company&#8217;s ability to meet its short-term obligations and identify areas where working capital management can be improved.<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Evaluating Financing and Investment Decisions<\/b><span style=\"font-weight: 400;\">\u00a0<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">With the help of a fund flow statement, a company can evaluate the impact of financing and investment on a company&#8217;s financial position. By analysing sources of funds, stakeholders can assess how a company raises capital and whether it relies more on debt or equity.<\/span><\/p>\n<ul>\n<li aria-level=\"1\"><b>Enhancing Financial Analysis\u00a0<\/b><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">The fund flow statement complements other financial statements, such as the income statement and balance sheet. It is mainly because it provides additional data about the movement of funds. By analysing these statements, stakeholders can gain a more comprehensive understanding of a company&#8217;s financial performance, profitability, and solvency.<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"Understanding-the-Analysis-of-Fund-Flow-Statement\"><\/span><b>Understanding the Analysis of Fund Flow Statement\u00a0<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">The fund flow statement shows the comparison between various components of a balance sheet, mostly assets and liabilities. The increase in the asset side of a balance sheet refers to the fact that a company has incurred assets with the help of funds. This also indicates that these assets will channelise more funds in the future. Some examples of funds-producing assets are fixed assets, long and short-term loans, receivables, inventory, etc.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">On the contrary, an increase in the liability side of a balance sheet indicates that a company needs to pay through fund inflows. Some crucial examples of liability are payments to lenders, customers, shareholders, etc.\u00a0<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"Fund-Flow-Statement-vs-Cash-Flow-Statement\"><\/span><b>Fund Flow Statement vs Cash Flow Statement\u00a0<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<table>\n<tbody>\n<tr>\n<td><b>Basis of Difference<\/b><\/td>\n<td><b>Fund Flow Statement\u00a0<\/b><\/td>\n<td><b>Cash Flow Statement\u00a0<\/b><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Matter of Consideration<\/span><\/td>\n<td><span style=\"font-weight: 400;\">During an assessment, the fund flow statement considers the working capital.\u00a0<\/span><\/td>\n<td><span style=\"font-weight: 400;\">The cash flow statement is a narrower concept than a fund flow statement which only considers the element of cash of the working capital.\u00a0<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Purpose<\/span><\/td>\n<td><span style=\"font-weight: 400;\">This statement generally lets the company know about sources of funds and its various utilisation points.\u00a0<\/span><\/td>\n<td><span style=\"font-weight: 400;\">In this statement, a company can find the opening and closing balance of cash through various sources and uses.\u00a0<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Analysis<\/span><\/td>\n<td><span style=\"font-weight: 400;\">The analysts of a company can decipher the changes in net working capital through this statement.\u00a0<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Cash flow statements only allow companies to know the changes in cash flow.\u00a0<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Basis of Accounting<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Fund flow statement follows the accrual basis of accounting.\u00a0<\/span><\/td>\n<td><span style=\"font-weight: 400;\">The cash flow statement converts the accrual basis into a cash basis.\u00a0<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Result<\/span><\/td>\n<td><span style=\"font-weight: 400;\">This type of statement helps businesses to make financial decisions in the future.\u00a0<\/span><\/td>\n<td><span style=\"font-weight: 400;\">This type of statement is ideal for taking into consideration the short-term goals involving the liquidity of the business.\u00a0<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>&nbsp;<\/p>\n<p><b>How Does RazorpayX Help Entrepreneurs in Preparing Fund Flow Statements?\u00a0<\/b><\/p>\n<p><span style=\"font-weight: 400;\">RazorpayX is a business banking platform that enables smart and automated banking facilities for small business owners and budding entrepreneurs. The <\/span><a href=\"https:\/\/razorpay.com\/x\/current-accounts\/\"><span style=\"font-weight: 400;\">current accounts<\/span><\/a><span style=\"font-weight: 400;\">, facilitated by RazorpayX allow seamless maintenance of accounts and unlimited withdrawal or deposits.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Furthermore, the <\/span><a href=\"https:\/\/razorpay.com\/x\/forex\/\"><span style=\"font-weight: 400;\">forex funding facility<\/span><\/a><span style=\"font-weight: 400;\">, powered by RazorpayX helps budding entrepreneurs meet their capital requirements. Not only this, the expert team of forex caters to every requirement with ease and educates important facts about forex trading, RBI guidelines and other compliances.\u00a0<\/span><\/p>\n<div style=\"text-align: center;\"><a style=\"border-radius: 3px; background: #528FF0; padding: 15px; font-weight: 600; cursor: pointer; text-decoration: none; color: white;\" href=\"https:\/\/razorpay.com\/x?r=blog_cta_business_banking_fund_flow_statement&amp;utm_source=blog&amp;utm_medium=cta\" target=\"_blank\" rel=\"noopener\" data-schema-attribute=\"\">Explore RazorpayX<\/a><\/div>\n<p>&nbsp;<\/p>\n<p><strong>Read more:<\/strong><\/p>\n<p><a href=\"https:\/\/razorpay.com\/learn\/business-banking\/current-account-opening-documents-required\/\"><span style=\"font-weight: 400;\">Current Account Documents<\/span><\/a><\/p>\n<p><a href=\"https:\/\/razorpay.com\/blog\/business-banking\/what-is-current-account\/\"><span style=\"font-weight: 400;\">What is Current Account<\/span><\/a><\/p>\n<p><a href=\"https:\/\/razorpay.com\/learn\/business-banking\/what-is-a-business-account-for-startups\/\"><span style=\"font-weight: 400;\">Business Account<\/span><\/a><\/p>\n<p><a href=\"https:\/\/razorpay.com\/learn\/business-banking\/mab-monthly-average-balance-current-account\/\"><span style=\"font-weight: 400;\">Monthly Average Balance<\/span><\/a><\/p>\n<p><a href=\"https:\/\/razorpay.com\/blog\/business-banking\/zero-balance-current-account-business\/\"><span style=\"font-weight: 400;\">Zero Balance Current Account<\/span><\/a><\/p>\n<p><a href=\"https:\/\/razorpay.com\/learn\/business-banking\/types-of-current-accounts\/\"><span style=\"font-weight: 400;\">Types of Current Account<\/span><\/a><\/p>\n<h2><span class=\"ez-toc-section\" id=\"FAQs\"><\/span>FAQs<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\t\t\t<div id=\"rank-math-rich-snippet-wrapper\" class=\"\">\n\n\t\t\t\t\n\t\t\t<\/div>\n\t\t\n","protected":false},"excerpt":{"rendered":"<p>The fund flow statement is a financial statement that records the inward and outward flow of business funds or assets. It identifies the reason for a change in the financial position of a company by comparing two years&#8217; balance sheets.\u00a0 This statement helps stakeholders understand how funds are generated and whether it has been utilised<\/p>\n","protected":false},"author":151156542,"featured_media":8232,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3437],"tags":[3678,3668],"class_list":{"0":"post-8115","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-banking","8":"tag-fund-flow","9":"tag-fund-flow-statement"},"_links":{"self":[{"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/posts\/8115","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/users\/151156542"}],"replies":[{"embeddable":true,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/comments?post=8115"}],"version-history":[{"count":4,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/posts\/8115\/revisions"}],"predecessor-version":[{"id":10308,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/posts\/8115\/revisions\/10308"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/media\/8232"}],"wp:attachment":[{"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/media?parent=8115"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/categories?post=8115"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/tags?post=8115"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}