The funds flow statement is a report on the movement of funds or working capital. It is a summary of a firm’s inflow and outflow of funds. It tells us from where funds have come and where funds have gone.
Cash flow statement or statement of cash flows is a financial statement that shows how changes in balance sheet and income accounts affect cash and cash equivalents, and breaks the analysis down to operating, investing, and financing activities.
Funds Flow Statement vs Cash Flow Statement
The cash flow statement is different from the fund flow statement in its approach. The difference between the two can be summarized as follows:
1. The fund flow statement is based on the concept of working capital, whereas the cash flow statement is based on cash which is only one of the elements of working capital.
2. The fund flow statement provides the details of funds movements, whereas cash flow statement provides the details of cash movements.
3. Fund flow statement considers the movement of the funds as defined in terms of net working capital, whereas the cash flow statement considers only the actual movement of funds.
4. In fund flow statement, net increase or decrease in working capital is recorded while in cash flow statement; individual item involving cash is taken into account.
5. Funds flow statement is started with the opening cash balance and closed with the closing cash balance records only cash transactions, whereas cash flow statement is started with the opening cash balance and closed with ht closing cash balance while there a no opening or closing balances in Funds Flow Statement.