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Both Cash Flow and Fund Flow are two essential apparatuses to measure the financial health or position of a business or company.
Cash Flow and Fund Flow are two completely different statements that are required for running a business and analyzing its shortcomings. Though both of them are closely related, their purposes are entirely different.
Students of commerce need to learn the difference between Fund Flow and Cash Flow to get a fair idea about this accounting concept.
What is Cash Flow?
It minutely records all the cash (or cash-like assets) inflows and outflows of a company within a specific period. It is divided into three categories.
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Cash Flow From Operating Activities- Cash generated from the core or general activities of a company is accounted for in this category.
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Cash Flow From Investing- All the investments made by the company (like buying new equipment) will be listed in this section.
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Cash Flow From Financing- This category records all the transactions including proceeding from new debts, dividends paid to investors, etc.
Companies generally acquire an inflow of cash from selling products, providing services, rent, receiving interest on investments, selling assets, etc.
The outflow of cash occurs from paying back loans, making purchases, paying salaries, sharing dividends, etc.
What is Fund Flow?
Fund Flow records the movement of the cash flow of a company. It effectively keeps track of the net cash inflows and outflows of financial funds. It also states if a company has made any out-of-character operation like irregular expenses.
Fund flow is extremely essential for investing purposes of a company. However, for investing aspects, Fund Flow does not provide the cash position of a company, for that matter, cash flow is required.
Difference Between Cash Flow and Fund Flow
The following table elucidates the cash flow and fund flow difference clearly to clear the concept.
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Basis of Comparison |
Cash Flow |
Fund Flow |
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Meaning
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It shows how a company spends its cash revenue by giving a record of all inflows and outflows. |
It charts the financial standing of a company. Also the source of the cash fund and application of it. |
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What Is Measured?
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The real cash or cash-like assets are calculated |
Only funds and capital are calculated |
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What does it Display?
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Inflows and Outflows of hard cash |
The source and application of existing funds. |
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Purpose
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To keep a record of cash from the initial stage to the end of a specific period |
The transformation of the business, from last financial quarter to existing one |
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Reveals
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The short-term position of a business |
The long-term standing of a business |
Difference Between Cash Flow Statement and Fund Flow Statement
Fund flow and cash flow both are recorded through a statement which is called Fund Flow Statement and Cash Flow Statement respectively.
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Points of Comparison |
Fund Flow Statement |
Cash Flow Statement |
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Basis of Analysis |
On the broader concept of working capital |
On the narrower concept of cash only |
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Source
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States the sources of funds generation |
States the opening cash balance and closing cash balance |
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Usage
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In accessing long-range financial planning |
Computes short term spending details |
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Working Capital Change Schedule
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Changes in current liabilities and assets are shown through the movement of working capital |
It shows those changes through the cash flow statement itself |
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End Result
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Portrays the reasons for the change in net capital |
Portrays the reasons for changes in cash flows only |
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Accounting Principle
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Follows accrual basis of accounting |
Follows cash basis of accounting |
Hence, once you understand the basic difference between cash flow and fund flow, it will be easier for you to comprehend the overall cash flow mechanism of an organization.
Write a similar note on the difference between Trial Balance and Balance Sheet to get a better grip on this subject. For further details on this topic or other accounting topics, tune in to ’s website.
Significant Differences Between Cash Flow and Fund Flow
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The cash flow statement is one of four financial statements that every investor examines to evaluate a company’s financial status. In contrast, the money flow statement is not a financial statement.
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The cash flow statement is generated so that the company’s net cash flow may be determined at the end of a specific period. A money flow statement is created to show the sources and uses of funds over a specific period, as well as how that “change in funds” affects the company’s working capital.
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A cash basis of accounting is used to generate the cash flow statement. The fund flow statement, on the other hand, is generated using the accrual accounting method.
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The cash flow statement is used to budget for cash. For capital budgeting, a fund flow statement is employed.