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Which of the following is a source of fund in fund flow statement

  • A.Decrease in working capital
  • B.Redemption of debentures
  • C.Payment of dividends and tax
  • D.Funds lost through business operations

Answer: A

A decrease in working capital is a source of funds in a fund flow statement. When the schedule of changes in working capital shows that working capital has fallen, funds have been released from it and are treated as a source, while an increase in working capital is an application of funds. Redemption of debentures, payment of dividends and tax, and funds lost through business operations are uses or applications of funds, since they take funds out of the business.

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