Differences between Cash Flow Statement and Funds Flow Statement
Even though Cash flow statement and Funds flow statement focus on the concept of fund, there are some differences between these two statements. They are discussed below.
Differences between Cash Flow Statement and Funds Flow Statement
| Cash Flow Statement | Fund Flow Statement |
|---|---|
| 1. It is prepared on the basis of cash and cash equivalents. | 1. It is prepared on the basis of fund as working capital. |
| 2. Cash from operation is calculated. | 2. Funds from operation is calculated. |
| 3. Statement of changes in working capital is not prepared. | 3. Statement of changes in working capital is prepared. |
| 4. It is started with cash flows from operating activities. | 4. It is started with funds from operation or funds lost in operation. |
| 5. It is ended with closing cash in hand and cash equivalents. | 5. It is ended with either increase in working capital or decrease in working capital. |
| 6. The reasons for the change in cash are known through cash flow statement. | 6. The reasons for the change in working capital are known through fund flow statement. |
| 7. Short term financial pIanning is done through cash flow statement. | 7. Medium term and long term financial planning is done through funds flow statement. |
| 8. Cash flow analysis is based on cash concept. | 8. Funds flow analysis is based on accrual concept. |
| 9. It is used for preparing cash budgeting. | 9. It is used for preparing capital budgeting. |
| 10. It shows only changes in cash position. | 10. It is concerned with the changes in working capital between two balance sheet dates. |
| 11. It is worked as an indicator of improved working capital. | 11. It is not necessary that an improved fund position will be an indicator of improved and sound cash position. |
| 12. Increase in current liability or decrease in current assets brings decrease in working capital and vice versa. | 12. Increase in current liability or decrease in current asset brings increase in cash and vice versa. |
