Income statement and funds flow statement can be distinguished as below:
1. Meaning
Income Statement: Income statement is a summary of total income and total expenses and losses of a particular period.
Funds Flow Statement: Funds flow statement is the statement of changes in financial position.
2. Objective
Income Statement: Income statement is prepared to ascertain the profit earn or loss suffered by a firm.
Funds Flow Statement: Funds Flow Statement is prepared to identify how the profit has been utilized
3. Preparation
Income Statement: Income statement is prepared on the basis of nominal accounts.
Funds Flow Statement: Funds flow statement is prepared on the basis of balance sheet.
4. Measurement
Income Statement: Income statement is helpful in measuring the profitability of a firm.
Funds Flow Statement: Funds flow statement is helpful in determining the net changes in working capital.