FUNDS FLOW STATEMENT
Funds flow statement is one of the important tools, which is used in many ways. It helps to
understand the changes in the financial position of a business enterprise between the
beginning and ending financial statement dates. It is also called as statement of sources and
uses of funds.
Institute of Cost and Works Accounts of India, funds flow statement is defined as “a
statement prospective or retrospective, setting out the sources and application of the funds
of an enterprise. The purpose of the statement is to indicate clearly the requirement of
funds and how they are proposed to be raised and the efficient utilization and application
of the same”.
CASH FLOW STATEMENT
Cash flow statement is a statement which shows the sources of cash inflow and uses of
cash out-flow of the business concern during a particular period of time. It is the statement,
which involves only short-term financial position of the business concern. Cash flow
statement provides a summary of operating, investment and financing cash flows and
reconciles them with changes in its cash and cash equivalents such as marketable securities.
Institute of Chartered Accountants of India issued the Accounting Standard (AS-3) related
to the preparation of cash flow statement in 1998.
Difference Between Funds Flow and Cash Flow Statement
Funds Flow Statement Cash Flow Statement
1. Funds flow statement is the report on the 1. Cash flow statement is the report showing
movement of funds or working capital sources and uses of cash.
2. Funds flow statement explains how working 2. Cash flow statement explains the inflow and
capital is raised and used during the particular out flow of cash during the particular period.
3. The main objective of fund flow statement is 3. The main objective of the cash flow statement
to show the how the resources have been is to show the causes of changes in cash
balanced mobilized and used. between two balance sheet dates.
4. Funds flow statement indicates the results of 4. Cash flow statement indicates the factors
current financial management. contributing to the reduction of cash balance
in spite of increase in profit and vice-versa.
5. In a funds flow statement increase or decrease 5. In a cash flow statement only cash receipt and
in working capital is recorded. payments are recorded.
6. In funds flow statement there is no opening 6. Cash flow statement starts with opening cash
and closing balances. balance and ends with closing cash balance.