Sources & application
This query is : Resolved
hardik sharma
(Querist)
10 October 2013
Is the difference of sources over application equal to net increase in assets,in case of individual?
Nikhil Kaushik
(Expert)
10 October 2013
on basic level yes.
hardik sharma
(Querist)
14 October 2013
Thanks for Answer. can u please explain to me how is it so in simple language?
25 July 2025
Great question!
For an individual (or any entity), the **difference between Sources and Applications of funds** essentially reflects the **net change in financial position** over a period.
* **Sources of Funds** = Where the money came from (e.g., income, loans, sale of assets, capital introduced).
* **Applications of Funds** = Where the money was used (e.g., expenses, purchase of assets, repayment of loans, drawings).
### Is difference = net increase in assets?
**Not exactly**, because:
* The **difference between Sources and Applications** shows the **net increase or decrease in funds** during the period.
* But **net increase in assets** means **increase in total assets owned**.
However, if there are **no changes in liabilities**, then:
> **Sources - Applications = Increase in Assets**
But if liabilities change (increase or decrease), then:
> **Net increase in assets = (Sources - Applications) + (Change in Liabilities)**
Because:
**Assets = Liabilities + Owner’s Equity**
---
### Summary:
* If liabilities remain constant, difference between sources and application = net increase in assets.
* If liabilities change, you must account for that change to find net asset increase.
---
If you want, I can help you with an example or a detailed explanation!
For an individual (or any entity), the **difference between Sources and Applications of funds** essentially reflects the **net change in financial position** over a period.
* **Sources of Funds** = Where the money came from (e.g., income, loans, sale of assets, capital introduced).
* **Applications of Funds** = Where the money was used (e.g., expenses, purchase of assets, repayment of loans, drawings).
### Is difference = net increase in assets?
**Not exactly**, because:
* The **difference between Sources and Applications** shows the **net increase or decrease in funds** during the period.
* But **net increase in assets** means **increase in total assets owned**.
However, if there are **no changes in liabilities**, then:
> **Sources - Applications = Increase in Assets**
But if liabilities change (increase or decrease), then:
> **Net increase in assets = (Sources - Applications) + (Change in Liabilities)**
Because:
**Assets = Liabilities + Owner’s Equity**
---
### Summary:
* If liabilities remain constant, difference between sources and application = net increase in assets.
* If liabilities change, you must account for that change to find net asset increase.
---
If you want, I can help you with an example or a detailed explanation!
You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now
Click here to login now
Similar Resolved Queries
Unanswered Queries
- Accounting treatment of AMC alongwith the purchase of Laptop
- Condonation Request sec 119(2) b -Enhancement Limit of Leave Exemption prior to AY 2023
- Unable to File TDS Q2 Return – New TRACES Portal Error
- Issuing of delivery challan by seller of goods
- Taxation of crypto futures in India Fy 2026- 2027
- Not ordinarily resident having partnership income in India and salary in USA is any form to filed be
- GST Treatment of Purchases with GST Paid where Outward Supplies of Manufactured CattleFeed Exempt
- EPF ECR NEW RULES Sep 17th 2026
- Transfer of Physical Stock Between Two Proprietorship Concerns
- Expert Help Required for TDS Refund 100000 Through TRACES – AY 2022–23
- IMPORT PURCHASE ENTRY PASSED IN BOOKS OF ACCOUNT
- FAST DS 26 Undisclosed Foreign Asset Disclosure Scheme 2026
- Regime change
- Goods sold but invoice not issued
- Tally: Imported bank entries do not show up in manual reconciliation
- Sales of goods of amount Rs97 lakhs to a party
- Confused About My Career After 12th — Cyber Security, AI or Finance? Need Guidance
- FAST-DS 2026 Under Tax Law - No recourse or support for person declaring via this scheme?
- Guidance Needed: Linking Multiple Form 26QB Payments and Responding to ITD Defaulter Notice
Trending Online Classes
-
DT & Audit (Exam Oriented Fastrack Batch) - For May 26 Exams and onwards Full English
CA Bhanwar Borana & CA Shubham Keswani
Subscribe to Pro
Join an elite circle of professionals
CAclubindia
