File Name: difference between cash flow and fund flow statement .zip
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Cash flow refers to the overall cash generated by the firm in a specific accounting period and is calculated as the sum total of cash from operations, cash flow from financing and cash flow from investing activities, whereas, the fund flow of the company records movement of the cash in and cash out from the company during the specified period of time. Cash flow and fund flow are completely different statements that have varied scopes and serve different purposes.
Cash Flow statement shows the changes in the cash position Inflows and outflows of a firm. It is an analytical reconciliation statement which explains the reasons for the differences between the opening and closing cash balances over a period. The financial position of any company can be better understood with the help of a cash flow statement and fund flow statement, along with the Balance Sheet and Income statement. So, take a glance of the given article to understand the difference between cash flow and fund flow statement.
Answer The points of distinction between cash flow and funds flow statement are as below: Cash flow statement i It ascertains the changes in balance of cash in hand and bank ii It analyses the reasons for changes in balance of cash in hand and bank iii It shows the inflows and outflows of cash. Cash Flow and Funds Flow Statements Both funds flow and cash flow statements are used in analysis of past transactions of a business firm. The differences between these two statements are given below: 1. Funds flow statement is based on the accrual accounting system. In case of preparation of cash flow statements all transactions effecting the cash or cash equivalents only is taken into consideration. Funds flow statement analyses the sources and application of funds of long-term nature and the net increase or decrease in long-term funds will be reflected on the working capital of the firm.
Cash flow refers to the current format for reporting the inflows and outflows of cash , while funds flow refers to an outmoded format for reporting a subset of the same information. Cash flow is derived from the statement of cash flows. This statement is required under Generally Accepted Accounting Principles GAAP , and shows the inflows and outflows of cash generated by a business during a reporting period. The information in a statement of cash flows is aggregated into the following three areas:. Operating activities. Comprised of the main revenue -generating activities of a business, such as receipts from the sale of goods and payments to suppliers and employees.
Absolutely zero maintenance charges. Investment in securities market are subject to market risks, read all the related documents carefully before investing. Brokerage will not exceed the SEBI prescribed limit. For more information, visit our disclosure page. In common dialect, cash and funds are used interchangeably. Nevertheless, when it comes to accounting, the two project significant differences in their scope and utility, among other factors.
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There are 3 basic financial statements that exist in the area of Financial Management. Balance Sheet.
Even though Cash flow statement and Funds flow statement focus on the concept of fund, there are some differences between these two statements. They are discussed below. It is prepared on the basis of cash and cash equivalents. It is prepared on the basis of fund as working capital.
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Cash flow statements signify the changes in the cash and cash equivalents of the business due to the business operations in one time period. Funds flow statements report changes in a business's working capital from its operations in a single time period, but have largely been superseded by cash flow statements.
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