The statement of changes  in financial position discloses the inflow and outflow of funds. What is then meant by the term ‘flow of funds’. The dictionary meaning of the term flow is: to move or to circulate. In the context of SCFP, the term ‘flow of funds’ refers to the transfer of economic values from one asset to another (as in the purchase of a machine for cash). It also refers to the transfer of economic values from one equity (liability) to another ( as in the payment of creditors with the proceeds of a bank loan). It refers tot eh transfer of economic values from one asset to any liability or capital or vice versa (as in the distribution of dividends to shareholders). It has been mentioned above theta the SCFP should include financing activities which do not affect working capital or cash in order to provide a complete explanation f the changes in financial position. Thus in abroad context, the term flow fo funds refers bother to the flow of working capital and the flow of non-current accounts which do not affect working capital.

For more help in Concept of Flow click the button below to submit your homework assignment