Q.

4 Bring out the different between Funds Flow Statement and Cash
Flow Statement, mention up to what point in time they are similar
and from where the different begin.

Ans. Fund Flow Statement

“A statement of sources and application of funds is a technical device
designed to analyses the change in the financial condition of a business
enterprise between two dates.”

In brief it may be said that fund statement focuses on flow of funds

between the various assets and equity items during the accounting period.
And analysis base4d on this statement is generally called “fund flow
statement”.

Meaning of fund:
The term “fund” refers t cash, to cash equivalent or to working capital and all
financial resources which are used in business.

Meaning of flow of fund:

The term “flow of funds” refers to change or movement of funds or change in
working capital in the normal course of business transactions.

FIRM INFLOW OF
OUTFLOW OF BUSINESS
TRANSACTIONS
FUNDS FUNDS

Cash Flow Statement

Cash flow is the life blood of a business which plays a vital role in an entire
economic life. Cash flow s refers to actual movement of cash into and out of
an organization. In other words, the movement of cash inclusive of inflow of
cash and outflow of cash. When the cash flow into the organization, it
represents ‘inflow of cash’. Similarly when the cash flows out of the business
concern, it called as “cash outflow”.
 In order to ensure cash flows are adequate to meet current liabilities
such as tax payments, wages, amounts due to trade creditors, it is essential
to prepare a statement of changes in the financial position of a firm on cash
basis is called as “cash flow statement”. This statement depicting movement
of cash position from one period to another.

The cash flow statement is intended to:-

1. provide information on a firm's liquidity and solvency and its ability to

change cash flows in future circumstances
2. provide additional information for evaluating changes in assets,
liabilities and equity
3. improve the comparability of different firms' operating performance by
eliminating the effects of different accounting methods
4. Indicate the amount, timing and probability of future cash flows.

The cash flow statement has been adopted as a standard

financial statement because it eliminates allocations, which might be
derived from different accounting methods, such as various
timeframes for depreciating fixed assets.

Difference between Funds flow statement and Cash flow

statement

N Funds Flow Statement Cash Flow Statement

o.
1. Funds Flow Statement showing Cash Flow Statement showing
the source & application of funds changes in inflow & outflow of cash
during the period. during the period.
2. FFS is showing the fund for the CFS is showing the fund for present
future activates of the activates of the company

Company.
3. Fund Flow statement helps to Cash flow statement focuses on the
 measure the causes of change in causes for the movement of cash
working capital. during a particular period.
4. Fund flow statement is prepared Cash Flow statement is based on
on the basis of fund or all cash basis of accounting.
financial recourses.
5 Fund Flow analysis helps to Cash flow statement guides to the
management for intermediate management for short term
and long term financial planning. financial planning.
6. Statement of changes in working For cash Flow statement no such
capital is required for the statement is required.
presentation of Fund Flow
statement.