Cash flow and fund flow

Cash flow

Cash flow is the summary statement shows

-money receipts by the organization

-money payments by the organization

-difference of total receipts > total payments , then cashflow is positive.

-difference of total receipts < total payments, then cashflow is negative.

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Funds flow

The funds flow statement shows how the sources of funds
Equal the uses of funds during the period covered
By the statement.

Funds obtained from
-sales of goods
-sales of properties
-sale of stock
-borrowings
-others

Are related to their use for
-purchase of fixed assets
-payment of debts
-distribution of funds
-other purchases

Cash flow and Funds flow statements do not differ much from each other as both the statements show transactions which result in the change of financial resources during a particular

Accounting period.

The main differences are:

1) Funds flow statement gives a broad perspective by indicating changes in working capital where as cash flow statement indicates specifically the inflow and outflow of cash, which is one of the components of working capital as used in funds flow statement. Therefore cashflow is a narrow term as compared to funds flow.

2) Funds flow shows the causes of changes in net working capital or funds but cash flow shows the causes of changes in cash.

3) Funds flow has no opening n closed balances but cash flow statement has.

4) Funds flow statement is useful for long-term financing, while cash flow statement is useful for short term.