Abstract In examinations conducted by the various state boards, problems are often given requiring the preparation of a statement of application of funds. Where the data necessary for solution are few, problems of this type can be worked out without the use of working papers merely by noting the increases and decreases in the balance sheets at the beginning and end of the period. Where the transactions are numerous, it is common practice to resort to the use of working papers. The working-paper method is the plan usually followed in presenting the theory of the statement of application of funds to students by text books in accounting. The candidate for a certificate should not only know the principles necessary to solve a problem involving sources of funds and their application, but also be able to complete the assignment within the time limit. A statement of sources and applications of funds deals primarily with the items out-side of the current-asset-and-liability section of the balance sheet. The article presents, as an example, a problem given in the November 1925 examination of the American Institute of Accountants.