Components of the Report of Financial Changes.

Abstract An area of accounting that is subject to varying interpretations and inconsistencies in reasoning is the statement of source and application of funds used in reporting financial changes. Moreover, little effort has been made to iron out these shortcomings. The fact that this statement has always been relegated to a minor position in accounting use is apparently one reason why those who have worked with it have often been satisfied with their own ideas and have been unaware of or indifferent to the situation that exists. And, in reverse, it may well be that the inadequacy of theory in this area has prevented a wider use of the statement. In recent years there have been repeated predictions that the funds statement will play a more important role in the future and such a trend seems to be taking place in current financial reporting. If the statement is destined to greater usage, now is the time to crystallize further the thinking about it. To illustrate an important difference of concept, the reader is asked the question whether or not funds are involved in a transaction in which a plant is acquired by the issuance of securities without cash or other current assets being transferred.