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Jayesh Gupta
Jayesh GuptaCurious
In: 1. Financial Accounting > Financial Statements

What is the difference between cash flow statement and funds flow statement?

What is the difference between cash flow statement and funds flow statement?
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    1. PriyanshiGupta Graduated, B.Com
      2021-12-04T15:23:10+00:00Added an answer on December 4, 2021 at 3:23 pm
      This answer was edited.

      A Cash Flow Statement analyzes the effect of various activities in the company on cash and, that is, it shows the inflow and outflow of cash and cash equivalents.

      A Fund Flow Statement analyzes the financial position of a company by the inflow and outflow of funds.

      Both the statements are financial statements and are used to analyze the financial performance of the company of two different reporting periods. Both the statements record the inflow and outflow of cash or funds, as the case may be.

      The primary objective of preparing a Cash Flow Statement is to gain an understanding of the changes in the net working capital of the company and to classify the activities in the company under three different heads which helps in better analysis of Financial Statements for management, outsiders, and investors.

      The primary objective of preparing a Fund Flow Statement is to track the movements of funds in the company, as the extent of use of long-term and short-term borrowings, frequency of their procurement, its application, etc.

      The components of the Cash Flow Statement are:

      • Cash Flow from Operating Activities- activities concerning the regular business operations and working capital are classified under this head.
      • Cash Flow from Investing Activities- investment in long-term assets or sale of such assets are considered under this head.
      • Cash Flow from Financing Activities- borrowings that a company makes to fund its operations, their interest payment, and repayment are covered under this head.

      The components of the Fund Flow Statement are:

      Sources of Funds:

      • Owners
      • Outsiders

      Application of Funds:

      • Funds deployed in Fixed Assets
      • Funds deployed in Current Assets

      A sample format of the Cash Flow Statement will be:

      Particulars Amount
      Cash Flow from Operating Activities XXX
      Cash Flow from Investing Activities XXX
      Cash Flow from Financing Activities XXX
      Net Increase (Decrease) in Cash and Cash Equivalents XXX
      Cash and Cash Equivalents at the beginning XXX
      Cash and Cash Equivalents at the end XXX

      A sample format of the Fund Flow Statement will be:

      Particulars Amount
      Sources of Funds XXX
      Funds from Operations XXX
      Sale of Fixed Assets XXX
      Issue of Shares XXX
      Issue of Debentures XXX
      Long Term Borrowings XXX
      Total (A) XXX
      Application of Funds XXX
      Loss from Operations XXX
      Payment of Tax XXX
      Repayment of Loan XXX
      Redemption of Debentures XXX
      Redemption of Preference Shares XXX
      Total (B) XXX
      Net Increase (Decrease) in Working Capital XXX

      To conclude the difference between Fund Flow and Cash Flow Statement will be:

      Cash Flow Statement Fund Flow Statement
      Record of inflow and outflow of cash. Record of sources and application of funds.
      Prepared to analyze cash used in various activities. Prepared to track the movement of funds and their applications.
      Components include:

      • Operating Activities
      • Investing Activities
      • Financing Activities
      Components include:

      ·       Sources of Funds

      ·       Application of Funds

       

       

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