Following are the main application of funds

1. Loss from Operation: Profit from operations is treated as source of funds, in the same way, loss from operations should be treated as an application of funds. Loss from operations results in an outflow of funds from business.

2. Redemption of Redeemable Preference Shares: When redeemable preference shares are redeemed, it is an application of funds. If redemption is made at premium, it is also an application of funds.

3. Redemption of Debentures: Redemption of debentures (including premium on redemption) is also an application of funds.

4. Repayment of Long-term Loans: When long-term loans are paid, it is an application of funds since the working capital would be reduced.

5. Payment of Tax and Dividends: If the provision for tax and proposed dividends are treated as non-current liabilities, the payment of tax and payment of dividends (interim and final) are application of funds.

6. Amount withdrawn by Proprietors: If funds are withdrawn by proprietor for his personal use, it is an application of funds.

7. Purchase of Fixed Assets: When fixed assets such as land, building, machinery, furniture, long-term investments, etc. are purchased for cash they result in decrease of current assets.