Fund Flow Statement in JAIIB AFM: Complete Case Study Guide (2026)

The fund flow statement is one of the most scoring yet most misunderstood topics in the JAIIB AFM exam. If you can read where a company's money came from. Where it went.

You can answer almost any case-study question the examiner throws at you. This guide breaks the fund flow statement down into plain English. Walks you through a fully solved case study.

And gives you the exact format. Mistakes to avoid, and FAQs you need for 2026.

Whether you are revising for your first attempt or polishing your concepts before the exam window, treat this as your single reference page. Pair it with our mock tests and you will walk in confident.

What Is a Fund Flow Statement?

A fund flow statement is a financial report that shows the sources. Uses of funds over a period. Usually between two consecutive balance-sheet dates.

In simple terms. It answers two questions: where did the money come from. And where did it go?

Here. The word “funds” most often means working capital. Which is current assets minus current liabilities. So the statement essentially explains why the working capital of a company changed from one year to the next.

The statement is split into two clear sections:

• Sources of Funds: how the company raised funds — for example. Through long-term debt. Fresh equity, sale of fixed assets, or profits from operations.
• Uses (Applications) of Funds: how those funds were utilised — for example. Buying fixed assets, repaying long-term loans, paying dividends, or redeeming shares.

Why the Fund Flow Statement Matters for Banks

For bankers and financial analysts. The fund flow statement is far more than an academic exercise. It is a lens into a borrower's financial discipline. This is exactly why it sits inside the AFM (Accounting. Financial Management for Bankers) module of JAIIB.

Here is what it reveals:

• Financial performance: it shows how a company allocates its financial resources across the year.
• Long-term solvency: by separating long-term sources from long-term uses. It helps a bank judge whether a company can meet its long-term obligations.
• Working-capital management: it highlights how effectively the firm manages current assets. Current liabilities.

A classic red flag the statement exposes: a company financing long-term assets with short-term funds. Spotting that mismatch is precisely the analytical skill JAIIB wants to test.

Fund Flow Statement vs Cash Flow Statement

Students constantly mix these two up. And examiners love to exploit the confusion. The simplest difference: a fund flow statement is about the change in working capital. While a cash flow statement is about the change in cash. Cash equivalents only.

For a deeper comparison, study our companion guide on the cash flow statement right after this one. The two topics are best learnt side by side.

The Two Steps to Prepare a Fund Flow Statement

Almost every JAIIB case study follows the same two-step method. Get this sequence into muscle memory.

Step 1: Prepare the Schedule of Changes in Working Capital

Before the main statement. You build a small schedule comparing current assets. Current liabilities across the two years. The logic is simple:

• An increase in a current asset increases working capital.
• A decrease in a current asset decreases working capital.
• An increase in a current liability decreases working capital.
• A decrease in a current liability increases working capital.

The net figure at the bottom is either a net increase or a net decrease in working capital. This single number becomes the balancing item in your main statement.

Step 2: Prepare the Fund Flow Statement

Now list all long-term sources on one side. All long-term uses on the other. The most important source is usually Funds From Operations (FFO).

Net profit adjusted by adding back non-fund. Non-operating items such as depreciation. Goodwill written off, and loss on sale of assets.

Solved Case Study: Fund Flow Statement (JAIIB AFM Style)

Let us work through a clean, exam-style case study. The numbers below are illustrative and chosen to keep the arithmetic simple. So you can focus on the method.

Question: From the comparative balance sheet of ABC Ltd. Prepare the fund flow statement. During the year the company earned a net profit of ₹ 1,20,000. Charged depreciation of ₹ 40,000 on plant.

Working Capital Schedule

Working capital = current assets − current liabilities.

• Year 1: ₹ 3,50,000 − ₹ 1,50,000 = ₹ 2,00,000
• Year 2: ₹ 4,10,000 − ₹ 1,40,000 = ₹ 2,70,000
• Net increase in working capital = ₹ 70,000 (a use of funds)

Funds From Operations

Start with net profit and add back depreciation. Since depreciation is a non-fund charge.

• Net profit: ₹ 1,20,000
• Add: Depreciation: ₹ 40,000
• Funds From Operations = ₹ 1,60,000

The Completed Fund Flow Statement

Note on plant: closing plant (₹ 5,10,000) + depreciation written off (₹ 40,000) − opening plant (₹ 4,00,000) = ₹ 1,50,000 purchased during the year. Both sides total ₹ 2,60,000, so the statement balances — always your final check.

Analyst's read: ABC Ltd funded a large plant purchase mainly from internal operations. Fresh equity. While still repaying debt and growing working capital. That is a healthy. Well-balanced funding pattern — exactly the conclusion an examiner expects you to state.

Quick-Facts Table: Fund Flow Statement at a Glance

How to Study This Topic Smartly

The fund flow statement rewards practice over memorisation. Follow this simple study plan:

1. Learn the two-step method first — working-capital schedule, then the main statement. Never reverse the order.
2. Memorise the four working-capital rules for increases and decreases in current items.
3. Drill 8–10 solved case studies until the format is automatic. You stop second-guessing what is a source versus a use.
4. Always do the balance check — if both sides do not tie out. You have an error to find.
5. Attempt timed questions on our mock tests and review every mistake before the next session.

Common Mistakes Students Make

Avoid these recurring errors. You will instantly score higher in the AFM case study section:

• Putting current items in the main statement. Changes in current assets. Current liabilities belong only in the working-capital schedule. Never in the sources-and-uses table.
• Forgetting to add back depreciation. Depreciation is a non-fund charge; ignoring it understates Funds From Operations.
• Confusing fund flow with cash flow. Remember: fund = working capital, cash flow = cash only.
• Wrong direction of working-capital change. A net increase in working capital is a use of funds. Not a source.
• Skipping the balance check. If totals do not match. Marks are lost — always reconcile before moving on.

Frequently Asked Questions

What is a fund flow statement in simple words?

It is a statement that shows the sources. Uses of funds between two balance-sheet dates. Explains why a company's working capital changed during the period.

What is the difference between fund flow and cash flow?

A fund flow statement focuses on the change in working capital. Long-term solvency. While a cash flow statement focuses only on the movement of cash. Cash equivalents through operating. Investing and financing activities.

Why is depreciation added back in a fund flow statement?

Depreciation is a non-fund (non-cash) expense that reduces accounting profit. Does not actually move any funds out of the business. So it is added back to net profit to arrive at Funds From Operations.

Is the fund flow statement important for the JAIIB AFM exam?

Yes. It is a high-yield topic in the AFM module. Frequently appears as a numerical case study.

Mastering the format and the working-capital schedule can secure easy marks. For the exact weightage and pattern. Confirm on the latest official IIBF notification.

What is the first step to prepare a fund flow statement?

Always prepare the Schedule of Changes in Working Capital first. The net increase or decrease it produces becomes the balancing figure in the main fund flow statement.

Conclusion: Turn This Topic Into Guaranteed Marks

The fund flow statement looks intimidating only until you internalise its two-step rhythm. Once you can build the working-capital schedule. Slot every item into sources or uses. The JAIIB AFM case study becomes one of the most predictable. Scoring questions on the paper.

Be methodical, practise relentlessly, and always run the balance check. Do that. And you will not just pass. You will master the kind of financial analysis real bankers use every day. Keep going; your AFM score is firmly in your hands.

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