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Followings are the main differences between cash flow statement and
funds flow statement.
1. Concept:- Cash flow statement is based on narrow concept of funds,
which considers changes in cash. Funds flow statement is based on the
changes in working capital which considers both the changes in cash as
well as other components of current assets and current liabilities.
2. Basis Of Preparation:- Cash flow statement is prepared on cash basis.
Funds flow statement is prepared on accrual basis.
3. Working capital:-Cash flow statement does not require use of
changes in working capital because all the changes in assets and
liabilities are summarizes in cash flow statement. Funds flow statement
requires to use of separate statement of changes in net working capital.
4. Link:-The preparation of cash flow statement considers only those
transactions that are linked with flow of cash. The preparation of funds
flow statement considers those transactions that are linked with flow of
funds along with actual cash.
5. Usefulness:-Cash flow statement is more useful in short term
analysis and cash planning. Funds flow statement is more useful in
long-term analysis of financial planning.