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Question
Distinguish between a funds flow statement and a cash flow statement.
Distinguish Between
Solution
| Basis for comparison | Fund flow | Cash flow |
| Meaning | A funds flow statement shows changes in working capital position between two balance sheet dates. | A cash flow statement shows only the changes in cash position. |
| Purpose of Preparation | To explain why the financial condition changed between the previous and current accounting years. | To explain why cash flows occur at the start and end of an accounting period. |
| Basis | Accrual Basis of Accounting. | Cash Basis of Accounting. |
| Utility | Long term Analysis. | Short term Analysis. |
| Discloses | Sources and applications of funds. | Inflows and Outflows of Cash. |
| Part of financial statement | No | Yes |
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Distinction Between Funds Flow Statement and Cash Flow Statement
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