STATEMENT OF CHANGES IN FINANCIAL POSITION (SCFP): TOTAL RESOURCE BASIS Homework Help

STATEMENT OF CHANGES IN FINANCIAL POSITION  (SCFP): TOTAL RESOURCE BASIS

The SCFP statements based on working capital as well as cash are incomplete and inadequate to the extent that they omit some major financial and investment activities like issue of equity shares or debentures for purchase of building or plant and machinery, conversion of debentures into shares, issue of bonus shares and the like. Such items of course do not affect working capital but are significant and therefore, need to be shown in the SCFP to achieve the objective of showing ; the financing and investment activities of the firm. The SCFP statement prepared on the basis of the total resources concept includes all these significant financial transactions. Thus, the total resources concept is the best and the most comprehensive approach to disclose the changes in the financial position of the firm. For the firm in Example and the SCFP on total resources basis is illustrated in Table.

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