The first step in preparing a statement of changes in financial position-working capital basis-is to determine the increase or decrease in working capital. This is done by preparing a separate statement generally designated as ‘Schedule of Changes in Working Capital’ that shows the change in each working capital account and its effect on working capital. The following general rules, as an aid account and its effect on working capital. The following general rules, as an aid to the analysis of working capital changes, may be noted: (i) An increase in current asset causes an increase in the working capital. (ii) A decrease in current asset causes  a decrease in working capital. (iii) An increase in current liability causes a decrease in working capital. (iv) A decrease in current liability causes an increase in working capital. (v) When either a current asset or currant liability remain unchanged between the beginning and end of an accounting period, it has no effect on working capital. For the convenience of students, the following list summaries the major items of current assets and current liabilities for the purpose of schedule of changes in working capital only:

Current Assets                                                    Current Liabilities                                                   
1.    Cash in hand                                               1. Trade Creditors
2.    Cash at Bank                                               2. Bills Payable
3.    Debtors                                                         3. Accrued Expenses Payable
4.    Stock-in-trade                                              4. Bank overdraft
5.    Short term investments
6.    Stores
7.    Bills Receivable
8.    Prepaid expenses or prepayments
9.    Work-in-progress

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