| Balance Sheet is made up of Current Assets, Current Liabilities, Non-Current Assets and Non-Current Liabilities. | |
| + | All accounting transactions affect the balance sheet. |
| ⇒ | All accounting transactions affect one or more of Current Assets, Current Liabilities, Non-Current Assets and Non-Current Liabilities. |
All accounting transactions may influence funds
From
| Working Capital | = | Current Assets - Current Liabilities; | |
| (Or) | = | Non-Current Liabilities - Non-Current Assets | |
we can say that any transaction that brings about a change in one or more of Current Assets, Current Liabilities, Non-Current Assets or Non-Current Liabilities may result in a change in Fund or Working Capital.
| + | All accounting transactions affect one or more of Current Assets, Current Liabilities, Non-Current Assets and Non-Current Liabilities. |
| ⇒ | All accounting transactions may influence the fund or working capital. We use may because there are some accounting transactions which do not bring about a change in fund or working capital. |
Accounting transactions not influencing funds
We see no change in working capital, where, on account of a transaction, there is a
change by the same amount in the same direction in
| a current asset and a current liability |
| (Or) | a non current asset and a non current liability |
change by the same amount in opposite directions in
| two current assets |
| (Or) | two current liabilities |
| (Or) | two non-current assets |
| (Or) | two non-current liabilities |
Cross Transactions : Accounting transactions influencing funds
We see a change in working capital, where, on account of a transaction, there is a
change by the same amount in the same direction in
| a current asset and a non-current liability |
| (Or) | a current liability and a non current asset |
change by the same amount in opposite directions in
| a current asset and a non-current asset |
| (Or) | a current liability and a non-current liability |
Cross Transactions
Cross transactions are accounting transactions involving one account which falls in the current area and another account which falls in the non-current area of the balance sheet and which change in the same direction when one of them is an asset and the other is a liability or in opposing directions when both are either assets or liabilities.
Cross transactions is an idea used in the topic funds flow analysis. Such transactions influence i.e. bring about a change in fund or working capital.
