Differences Between Cash Flow Statement And Funds Flow Statement

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.