A statement of changes in financial position (SCFP) shows where the financial resources (funds) have come from (sources) and where they have gone (uses). SCFP is generally prepared on working capital basis and cash basis. Working capital based SCFP explains increase or decrease in working capital for a specified period of time. It reports:
· Amount of changes in working capital associated with the operating activities of a firm.
· Long term financing or other sources that cause an increase in the working capital.
· Long term investment activities or other uses that cause a reduction in the working capital.
Cash basis SCFP, also known as cash flow statement, summarises the flow of cash in and out of the firm over a period of time. It focuses on various items which bring out changes in the cash balance between two balance sheet dates. It covers all items which increase or decrease the cash of a business enterprise.
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