What is the difference between cash flow statement and funds flow statement?

A Cash Flow Statement analyzes the effect of various activities in the company on cash and, that is, it shows the inflow and outflow of cash and cash equivalents.

A Fund Flow Statement analyzes the financial position of a company by the inflow and outflow of funds.

Both the statements are financial statements and are used to analyze the financial performance of the company of two different reporting periods. Both the statements record the inflow and outflow of cash or funds, as the case may be.

The primary objective of preparing a Cash Flow Statement is to gain an understanding of the changes in the net working capital of the company and to classify the activities in the company under three different heads which helps in better analysis of Financial Statements for management, outsiders, and investors.

The primary objective of preparing a Fund Flow Statement is to track the movements of funds in the company, as the extent of use of long-term and short-term borrowings, frequency of their procurement, its application, etc.

The components of the Cash Flow Statement are:

• Cash Flow from Operating Activities- activities concerning the regular business operations and working capital are classified under this head.
• Cash Flow from Investing Activities- investment in long-term assets or sale of such assets are considered under this head.
• Cash Flow from Financing Activities- borrowings that a company makes to fund its operations, their interest payment, and repayment are covered under this head.

The components of the Fund Flow Statement are:

Sources of Funds:

• Owners
• Outsiders

Application of Funds:

• Funds deployed in Fixed Assets
• Funds deployed in Current Assets

A sample format of the Cash Flow Statement will be:

A sample format of the Fund Flow Statement will be:

To conclude the difference between Fund Flow and Cash Flow Statement will be: