23 February 2011
A distinction between these two statements may be briefed as under:-
(i) Funds Flow Statement is concerned with all items constituting funds (Working Capital)for the business while Cash Flow Statement deals only with cash transactions. In other words, a transaction affecting working capital other than cash will affect Funds statement, and not the Cash Flow Statement.
(ii) In Funds Flow Statement, net increase or decrease in working capital is recorded while in Cash Flow Statement, individual item involving cash is taken into account.
(iii) Funds flow shows an increase in a current liability or decrease in current assets as decrease in working capital and vice versa whereas Cash flow shows an increase in current liability or decrease in current asset as increase in cash and vice versa
(iv) Cash Flow Statement is started with the opening cash balance and closed with the closing cash balance while there a no opening or closing balances in Funds Flow Statement.
(v) Funds flow is useful for long term financial planning whereas Cash flow is useful for short term financial planning.
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