STATEMENT OF CASH FLOWS OF FUND
FLOWS STATEMENT
ACCOUNTING
 is the art of recording, classifying and
summarizing transactions and events,
which are in part at least, of a financial
character and interpreting the results
thereof. (AICPA)
 provides financial information needed by
decision makers.
FINANCIAL STATEMENTS
• Show the results of operation of a firm
(Statement of Comprehensive Income or
Income Statement),
• the firm’s financial condition or position
(Statement of Financial Condition or
Statement of Financial Position or Balance
Sheet),
• the changes that occurred in the owner’s
equity, and/or the sources and uses of
funds.
• Ultimate or final product of the accounting
cycle
INCOME STATEMENT
• it shows firm’s revenues and expenses and
if the firm is earning a profit or incurring a
loss.
• it shows the firm’s profitability which is an
indication of stability for the firm.
BALANCE SHEET
• it shows the firm’s assets, liabilities and
capital or owner’s equity.
• it also shows a firm’s stability, liquidity and
solvency.
STATEMENT OF CHANGES IN OWNER’S
EQUITY
• shows how the owner’s equity changed.
• For a sole proprietorship and for a
partnership, investments and withdrawals
are detailed and the profit is added or the
loss is deducted from the owner’s/partners’
capital. This shows whether the capital has
increased or decreased.
• For a corporation, it details if additional
capital stocks are issued, whether the
stocks were sold at a premium and the
amount of retained earnings (accumulated
profit) the business has.
STATEMENT OF CASH FLOWS OF FUND
FLOWS STATEMENT
• a statement of the sources and uses of the
• a statement of the sources and uses of
company’s cash/funds.
• it details from where the funds came from
and where the cash went.
• It consists of three activities- operating,
financing and investing.
FINANCIAL STATEMENTS
• Are not only for internal users but also for
external users.
• Internal users: owners, managers and
employees
• External users: government and other
regulatory agencies, the suppliers, the
creditors, the competitive firms and the
community the business is in.
FINANCE
• The management of money or the money
resource itself.
NON-HUMAN CAPITAL
• Includes tangible and intangible resources
needed by a company to attain its goal.
TANGIBLE AND INTANGIBLE ASSETS
• Tangible assets include financial assets
such as cash and marketable securities that
help in maintaining a healthy working
capital position. They also include real
assets as property, plant and equipment.
• Intangible assets include goodwill,
copyrights, trade names and brands, among
others.
HUMAN CAPITAL
• includes human resources, i.e., the
employees, including the rank and file
employees, the managerial employees,
consultants, auditors, among others are
utilized by the company to attain its goals
and objectives.
• The intellectual and entrepreneurial skills of
managers are intangible assets of the
company.
GROWTH IN SALES
• Means additional investment in assets,
which, in turn, requires the need for
additional capital or funding.
FINANCIAL MARKETS
• Are institutions and systems that facilitate
transactions in all types of financial claims.
MONEY MARKET AND CAPITAL MARKET
• Money market – where companies and
individuals obtain short- term financing.
• Capital market – where long-term
 financing is obtained.
FINANCE AND ACCOUNTING
• While finance deals with sources and uses
of funds, accounting deals with recording
financial transactions to determine results
of operation and financial condition of the
business which will determine if funds
were acquired and utilized effectively.
PROFIT MAXIMIZATION
• the ultimate objective of any business firm
because it is the best way to increase
owners’ wealth and the value of the
company.
ACCOUNTING for PROFITS
• the measure managers and owners use to
measure performance of firms. Hence,
financial statements, which are the
products of accounting, are indispensable
tools to management, especially to financial
managers.
FINANCIAL ACCOUNTING
 the branch of accounting that deals with the
recording of business transactions and
ultimately the preparation of the financial
statements.
• The basic objective of financial accounting is
to provide the objective financial information
about how the business is performing and
how stable the company is.
MANAGERIAL ACCOUNTING
• the branch of accounting which deals with
providing internal users, primarily the
managers, with the financial information
they need to be able to perform their duties
efficiently and effectively and make the
necessary decisions to improve operation.
FINANCIAL MANAGEMENT
• (Managerial Finance) is concerned with
efficient and effective allocation, acquisition
and utilization of funds. Financial managers
are responsible for forecasting and
planning, making major investment and
financing decisions, coordination and control
and dealings with the financial markets