How to Prepare a Sources and Uses of Funds Statement

How to Prepare a Sources and Uses of Funds Statement


What Is a Sources and Uses of Funds Statement?

The sources and uses of fund statement is an accounting statement that summarizes the financial statement and financial plan. It shows the sources from which a business or a company obtains its cash and the uses to which this cash is put during a trading period.

Large companies and businesses include sources and uses of funds statement in their annual report. It is their way to show the lenders how much they need for a startup financial and how much collateral they will contribute. Creating sources and uses of fund statement is also one of the ways to strategize business financially.

The Sources and the Uses

Let us take a closer look at the sources and the uses of funds.

Sources of funds. The sources of funds is where all the money for funding is going to come from. For example, you may be providing furniture for your office, getting a loan to purchase equipment, or getting a line of credit for working capital.

Uses of funds. The money needed for various purposes for business startup. This includes:

  • The beginning quantities of supplies, equipment, and furniture.
  • Purchase of building or land.
  • Costs of deposits for rent

What Is the Statement of Sources and Application of Funds?

The statement example in word of sources and application of funds shows the total sources of new funds that are generated between the balance sheet dates and the total uses of those funds in the same period. it is also made up of a list of the changes that occur in all of the Balance Sheet Items between any two balance sheet dates.

The statement of sources and application of funds will exactly tell where the company got their money from and detail how the money was spent. It also tells whether the management plan has made reasonable investment decisions.

Steps in Creating a Sources and Uses of Funds Statement

As we have already learned in this article, there are two sections of the statement example in excel for funds: the sources and the uses. Here are the steps in creating the sources and the uses in the fund statement.

  • In the first section, which is the uses of funds, use the subtotals from your startup costs worksheets, such as the facilities, equipment and vehicles, supplies and advertising, and other startup costs. After that, total those numbers.
  • Include an estimate of your working capital needs. The working capital needs are the amount of money you have to obtain in order for you to pay the bills while you are still establishing your business analysis.
  • To determine the total use of funds, Add the total of startup funds and working capital needs.
  • In the sources of funds section, create a list of all funds you can provide, make those funds as collateral for the loan you are looking. This includes:
    • Equity in your company
    • A savings account
    • An IRA (Individual Retirement Account)
  • The difference of the total of the uses of funds and the total collateral you are providing must be equal to the amount of financing needed.