There are some basic differences between the two statements as mentioned below: Meaning: cash flow statement is a statement which reflects sources and uses of cash whereas fund flow statement is a statement that reflects changes in the working capital or fund.
Scope: The scope of cash flow is limited and it is based on the narrow concept of fund. i.e. cash alone whereas funds flow statement is a broader term and it is a wider concept of fund.
Component: Under cash flow statement, cash is an important factor and it is the part of working capital whereas funds flow statement is the working capital which includes cash, stock, debtors, bills and receivables, temporary investments etc.
Object: Cash flow statement is prepared to disclose only changes in cash position whereas funds flow statement is prepared to depict the changes in working capital between two balance sheet dates.
Conversion or adjustments of data: Adjustments for prepaid and outstanding expenses and incomes are made in preparation of cash flow statement in order to convert the data from accrual basis to cash basis whereas while preparing funds flow statement, there is no need for such conversion as this statement gives recognition to the accrual basis. Number of statements: Under cash flow statement, only one statement is prepared whereas in the case of funds flow statement, two statements are prepared and they are: 1) schedule of working capital changes and 2) statement of sources and uses of fund.
The Essay on Statement of Cash Flow
The importance of cash the cash flow statement help businesses and creditors understand how liquid a company is. Team A discussed some important factors about the statement of cash flow. The purpose of the statement of cash flow and how it is used in accounting is explained. The direct and indirect method of preparing a statement is used. Steps in preparation and classification are explained. The ...
Opening and closing balance of cash: In the case of cash flow statement, the opening cash balance and closing cash balance are shown whereas in the case of funds flow statement, there is no place for showing the opening and closing balance of cash and funds flow statement.
Uses: The use of cash flow statement is in financial analysis and cash planning whereas in mid-term and long-term planning, funds flow statement is useful.
Cash flow statement may be worked as an indicator of improved working capital whereas in the case of funds flow statement it is not necessary that an improved funds position will be an indicator for sound cash position. Impact of changes on cash;
Increase in current liability or decrease in current assets brings increase in cash and vice versa whereas in the cash of funds flow statement, working capital increase in current liabilities or decrease in current assets brings decrease in working capital and vice versa.
References
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