Cash Flow and Fundflow

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Prasanna Bhat

Prasanna Bhat (Querist)
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30 October 2008 What is the difference between fund flow and cash flow

S.Srinivasaraghavan

S.Srinivasaraghavan (Expert)
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30 October 2008 While cash flow represents flow of actual cash, fund flow represents movement of liabilities and assets as well.

Prasanna Bhat

Prasanna Bhat (Querist)
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30 October 2008 Thank you Mr. Srinivasaraghavan

Azmathullah Khan

Azmathullah Khan (Expert)
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30 October 2008 FUNDS: It refers to the working capital of a business

CASH FLOW STATEMENTS
A cash flow statement shows changes in cash position from one period to another. The term cash refers to both cash and bank balances. The change in cash position from one period to another is computed by taking into account of sources and application of cash.

PREPARATION OF CASH FLOW STATEMENTS

Opening balances
Cash Balance xxx
Bank Balance xxx
XXX

ADD
SOURCES OF FUNDS
Issue of shares xxx
Raising long term loans xxx
Sale of fixed assets xxx
Short-term borrowings xxx
Cash from operations xxx

TOTAL CASH AVAILABLE XXX

LESS
APPLICATION OF FUNDS
Redemption of redeemable preference shares xxx
Redemption of long term loans xxx
Purchase of fixed assets xxx
Decrease in deferred payment liabilities xxx
Cash out flow on account of operation xxx
Tax paid xxx
Dividend paid xxx
Decrease in unsecured loans and deposits etc xxx

TOTAL APPLICATIONS XXX

Closing Balances
Cash Balance
Bank Balance XXX

FUND FLOW STATEMENTS
The term flow means change and therefore the flow of funds means change in funds or change in working capital. In other words any increase or decrease in working capital means Flow of Funds.

PREPARATION OF FUND FLOW STATEMENTS

SOURCES OF FUNDS
Issue of shares xxx
Issue of debentures xxx
Long term borrowings xxx
Sale of fixed assets xxx
Operating profits xxx
Total sources XXX

APPLICATION OF FUNDS
Redemption of redeemable preference shares xxx
Redemption of debentures xxx
Payment of other long term loans xxx
Purchase of fixed assets xxx
Operating loss xxx
Payment of dividends, tax etc xxx
Total uses XXX

Net increase/decrease in working capital (Total sources – total uses)

Note while preparing funds flow statements, current assets and current liabilities are to be ignored. Attention is to be given to changes in fixed assets and fixed liabilities.

The difference between cash flow and funds flow is cash flow analysis is concerned only with the changes in cash position while a fund flow analysis is concerned with changes in working capital.

Prasanna Bhat

Prasanna Bhat (Querist)
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30 October 2008 Thx very much for the detail explanation, is there any PPT on this so that i can go through it.

S.Srinivasaraghavan

S.Srinivasaraghavan (Expert)
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31 October 2008 Not to my knowledge. But The books on management accounting like Brown & Howard explain it well.

Prasanna Bhat

Prasanna Bhat (Querist)
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31 October 2008 Thx, is there Indian author there for this

S.Srinivasaraghavan

S.Srinivasaraghavan (Expert)
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31 October 2008 'Management Accounting' by M Y Khan & P K Jain. Publishers : Tata McGraw Hill.

'Management Accounting : Text & Cases’ by Robert N. Anthony & James S. Recce.

‘Management Accounting’ by I M Pandey Publishers : Vikas Publishing House Pvt. Ltd.

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