What is the Difference Between Cash Flow and Fund Flow Statement?

The key difference between a cash flow statement and a fund flow statement lies in their scope and the financial aspects they cover. Here are the main differences between the two:

1. Scope: A cash flow statement records a company's actual cash inflows and outflows, focusing on short-term liquidity and cash availability for day-to-day operations. In contrast, a fund flow statement captures the movement of funds, including cash and non-cash items, within a business, providing a comprehensive view of the overall financial resources and long-term stability.
2. Focus: Cash flow statements are centered on the inflow and outflow of cash (cash and cash equivalents). Fund flow statements, on the other hand, focus on the changes in working capital over a period of time.
3. Purpose: A cash flow statement is best suited to gauge a company's liquidity profile, while a fund flow statement helps understand the financial position of the company and assists in long-term financial planning.
4. Method of Calculation: Cash flow statements calculate cash from operations, while fund flow statements calculate funds from operations.
5. ** Basis of Accounting**: Cash flow statements work on the cash basis of accounting, while fund flow statements work on the accrual basis of accounting.

In summary, cash flow statements provide insights into a company's liquidity and its ability to meet short-term financial obligations, while fund flow statements offer a broader view of the company's overall financial position and long-term stability. Both statements are essential for assessing a company's financial health and making informed decisions about its financial management.

Comparative Table: Cash Flow vs Fund Flow Statement

The main difference between cash flow and fund flow lies in their scope and the information they provide. Here is a table highlighting the key differences between the two:

In summary, the cash flow statement records changes in opening and closing balances of cash and cash equivalents, while the fund flow statement records the changes in working capital between two financial years. Cash flow statements are best suited for gauging a company's short-term liquidity, whereas fund flow statements provide a more comprehensive view of the company's overall financial resources and long-term stability.