fund flow & cash flow and dre

7/31/2019 Fund Flow & Cash Flow and DRE

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CASH FLOW STATEMENT

Meaning of cash flow:

its a statement which reflects source and uses of cash.

Scope:

its limite statement is based on the narrow concept of fund

Components:

cash is an important factor and its part of working capital.

Objective:

its prepared to disclose only changes in cash position.

Number of statements:

under cash flow statement, only one statement is prepared.

Opening and closing balance of cash:

in this statement cash balance is shown(opening and closing)

Uses:

The cash flow statement is used in financial analysis and cash planning


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FUND FLOW STATEMENT

Meaning of fund flow:

fund flow is that reflect changes in the working capital or fund.

Scope:

the fund is broaded term. it is wider concept of fund.

Component:

the fund or working capital includes cash,stock, deptors,bills and temporary

investment.

Objective:

fund flow statement is prepared to depict the changes in working capital between two

balance sheet dates.

Number of statements;

two statements are prepared

1. Working capital changes,

2. Statement of source and uses of fund.

Opening and closing of fund:

There is no place for showing opening and closing balance of cash and fund flow

statement.

Uses:

Used in mid-term and long-term planning


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DEFERRED REVENUE EXPENDITURE

Choose the one that suits u:

1)

DRE is an expenditure the benefit of which will be realised over a period and not

during the current period.

Example - Heavy Advertisement expenditure incurred by the company for promoting

the product.The benefits of this huge expenditure will be realised over the period and

not in the same period when it is incurred.

2)

DRE are the expenses incurred during one accounting year to get its benefit in

future or say more than one accounting year. It is the investment to get future

benefits.

A deferred revenue expenditure is that where the benefit the expenditure can be

had for more than ONE accounting period and less than FIVE accounting periods.

There are no hard and fast rules that the period is linted to 1 - 5. It is just an

assumption. It stands as an expired cost after the business entity has had the

complete benefits. It is written off every year.

E.g: AdvertisementExps of Rs.50000/-. Every year Rs.10000/- will be written off

over a period of 5 years.

3)

DRE is mainly revenue expenditure incurred in the initial stage but the benefit of

which will also be available in the sebsequent years is called deferred revenue

expenditure. Part of the expenditure is written off each year by debiting to P&L A/C

and the remaining will be shown in the B/S.

4)

A heavy expenditure of a revenue nature incurred for getting benefit, which

extends to two or more years is termed as "Defferred Revenue Expenditure". It is


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written off over two years or more during which the benefit is likely to last. It appears

in the asset side of the balance sheet.

Examples: Expenses of research and development, Abnormal loss arising out of fire,

preliminary expenses, expense of shifting the place of business.

fund flow & cash flow and dre

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