Difference between Funds flow Statement & Income Statement

Funds flow statement vs Profit and Loss Statement (Income Statement)

The funds flow statement is not prepared in lieu of profit and loss account. The purpose of preparing funds flow statement is differing from preparation of profit and loss account. The following are some of the differences between Funds flow statement and Income Statement.

1. What is it?

Funds Flow Statement deals with the financial resources of the company. Profit and Loss Statement deals with the operating results of the company

2. Contents:

Funds Flow Statement shows the sources of funds and applications of funds of the company. Profit and Loss Statement shows the extent of profit earned or loss suffered by the company.

3. Financial Position of Company:

Funds Flow Statement shows the changes in the financial position of the company. Profit and Loss Statement does not show the changes in the financial position of the company.

4. Preparation:

Profit and Loss Account helps the preparation of funds flow statement. The funds flow statement does not help in the preparation of profit and loss account.

5. Matching of funds:

Funds flow statement matches the funds raised and funds applied for a specific period. Profit and loss account matches the revenue income and revenue expenses of the company for a specific period.

6. Transaction:

Both revenue and capital nature transactions are considered for preparing funds flow statement. Only revenue nature transactions are taken into account for preparing profit and loss account.

7. Format:

There is no prescribed format for preparing funds flow statement. Profit and loss account is prepared in a prescribed format.

8. Working Capital:

Changes in working capital is taken into consideration for preparing funds flow statement. There is no relationship between changes in working capital and profit and loss account.

9. Whether Published?

Funds flow statement is not published. Profit and loss account is published.

10. Who Prepares?

Funds flow statement is prepared by the management accountant. Profit and loss account is prepared by the chartered accountant.

11. Usage:

Funds flow statement is used mainly by the internal management of the company. Profit and loss account is mainly used by the shareholders, creditors, investors etc.