By preparing the statement of cash flow, the company can analyze its liquidity position and can arrange finance if it is running short in cash or can invest the money for getting more return if it has excess funds. Interested parties can analyze the financial position of the business by reviewing Fund flow statements. It shows the sources from where the funds are obtained or the places where those funds are used.
The cash flow statement should be reviewed by interested parties with other financial statements to ascertain actual gain or loss to the company as it only depicts the cash position. Fund Flow statements should also be reviewed along with the balance sheet to judge the position of the business in a better manner. This is a guide to Cash Flow vs Fund Flow. Here we also discuss the Cash Flow vs Fund Flow key differences with infographics and comparison table.
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Fund Flow Statement The first two statements measure one aspect of performance of the business over a period of time. The main components of Working Capital are: Current Assets 1. Cash 2. Receivables 3. Inventory Current Liabilities 1. Payables Net working capital is the total change in the business's working capital, calculated as total change in current assets minus total change in current liabilities.
A Cash Flow Statement comprises information on following 3 activities: 1. Operating Activities 2. Investing Activities 3. Financing Activities 1. Basis of Analysis Funds flow statement is based on broader concept i. Source Funds flow statement tells about the various sources from where the funds generated with various uses to which they are put.
Usage Funds flow statement is more useful in assessing the long-range financial strategy. Schedule of Changes in Working Capital In funds flow statement changes in current assets and current liabilities are shown through the schedule of changes in working capital. End Result Funds flow statement shows the causes of changes in net working capital.
Principal of Accounting Funds flow statement is in alignment with the accrual basis of accounting. Advantages of Cash Flow Statement 1. Disadvantages of Cash Flow Statement 1. Advantages of Fund Flow Statements A Funds flow statement is prepared to show changes in the assets, liabilities and equity between two balance sheet dates, it is also called statement of sources and uses of funds. Some of these are: 1. Disadvantages of Fund Flow Statements F unds flow statement has many advantages; however it has some disadvantages or limitations also.
Phone is Optional. Deepak Jain. Anish P Mohan. Itz Facilitate Understanding.. Thank You.. Naveen Kumar. The fund flow statement is the earlier version of the cash flow statement. The cash flow statement is more comprehensive and details the multiple cash flows of a company, rather than just focusing on working capital.
The cash flow statement is best used to understand the liquidity position of a firm whereas the fund flow statement is best suited for long-term financial planning, which is why it is an important tool for investors. The fund flow statement is able to identify the sources of cash and their uses, and the cash flow statement starts with looking at the current level of cash and how it leads to the closing balance of cash.
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These choices will be signaled globally to our partners and will not affect browsing data. We and our partners process data to: Actively scan device characteristics for identification. I Accept Show Purposes. Your Money. Personal Finance. Your Practice. Popular Courses. It is an analytical reconciliation statement which explains the reasons for the differences between the opening and closing cash balances over a period.
On the other hand, Fund Flow statement is a statement that shows the ups and downs of the financial position or the changes in working capital of the entity between the two financial years. The financial position of any company can be better understood with the help of a cash flow statement and fund flow statement, along with the Balance Sheet and Income statement.
These two statements helps stakeholders to know the sources and application of cash or funds. So, take a glance of the given article to understand the difference between cash flow and fund flow statement. Basis for Comparison Cash Flow Fund Flow Meaning A cash flow statement is a statement showing the inflows and outflows of cash and cash equivalents over a period.
A fund flow statement is a statement showing the changes in the financial position of the entity in different accounting years. Purpose of Preparation To show the reasons for movements in the cash at the beginning and at the end of the accounting period. To show the reasons for the changes in the financial position, with respect to previous year and current accounting year.
Basis Cash Basis of Accounting. Accrual Basis of Accounting. Analysis Short Term Analysis of cash planning. Long Term Analysis of financial planning Discloses Inflows and Outflows of Cash Sources and applications of funds Opening and closing balance Contains opening and closing balance of cash and cash equivalents.
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