Many people think that both cash and fund are same, however they both are different and so is the case with cash flow statement and funds flow statement. Let’s look at some of the differences between cash flow and funds flow statement –
1. While funds flow statement reveals the change in the working capital of a company between two balance sheet dates while cash flow statement reveals the change in the cash position of the company between two balance sheet dates.
2. As funds flow statement shows the change in working capital it deals with all the components of working capital while cash flow statement deals only with cash and cash equivalents.
3. In case of funds flow statement schedule of changes in working capital is prepared while in case of cash flow statement no such schedule is prepared.
4. While cash flow statement there is classification of cash flows as cash flow from operating activities, cash flow from investment activities and cash flow from financing activities, but as far as funds flow statement is concerned there is no such classification.
5. As cash flow statement is only concerned with cash related transactions it is can be easily understood by a person who does not have accounting knowledge which is not the case with funds flow statement.