Statement of changes in Financial position:
There are two statements for determing the changes in the financial positio viz.,
Cash Flow Statement and Funds Flows statement
Cash Flow statement: Cash flow statement is a statement that shows the movements of cash. It takes the opening balance of cash adds all cash inflows and deducts all cash outflows to arrive at the closing cash balance. But this has a serious limitations. Money important transactions resulting in a change in Financial position are of a non-cash variety and are excluded from the statement.
The cash equivalent concept of fund can be useful "only for short-term financial planning.
Funds flow statement:
Funds flow statement describes the movements of funds during a period. In this statement, the overall increase/decrease in the total volume of working capital is only considered but not the item-wise change in the current assests and current liabilities. Working capital is the difference between the total liabilities is to change their form as quickly as possible. So the changes in their form need not be a reportable event so long as the volume of Working capital unchanged. But if there is any change in the total working capital, it should be reported.
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