Generally there are four kinds of financial statements in accounting they are balance sheet, income statement, cash flow statement and fund flow statement. So here we are going to discuss in detail about the cash flow and fund flow statements alone.
The statement of cash flow which refers to the change in a company’s cash and which is equivalent from one period to the next and the fund flow is which is of two different meanings in which one is for accounting purposes and other depends on the service for investment purposes.
What is cash flow?
Cash flow which is recorded on a company’s cash flow statement and the main statement for a company shows the inflow and outflow of actual cash assets from its activities. This is differently from the income statement where here in which records data or transactions which will not be fully realized where such as and collect it revenue or unpaid income.
On the other hand this cash flow statement will already have the information entered into an accurate portrait where how much cash a company is generating and the details will be generated.
What is Fund flow ?
Here as mentioned above this one has two different meanings one is for accounting purposes and other is for investment.
In accounting purposes the funds flow statement will be required by GAAP between 1971 and 1987. And this was required the statement of fund flow was primarily used by the accountants In order to report any change in a company’s net working capital during the time period.
For investment purposes this fund flow which will not give the cash position of a company. In case if company wanted to do that they would prepare its cash flow statement. The highlights of fund flow is the movements of cash only that is it reflects the net movement after examining inflows and the outflow of cashes.
Difference between cash flow statement and fund flow statement
Here the cash flow statement and fund flow statement focus on the concept of fund but even though there are some differences between these two statements.
Cash flow statement which is prepared on the basis of cash and cash equivalents fund statement is prepared based on the working capital.
An operation is calculated from cash in cash flow statement and fund flow statement operation is calculated from funds.
In cash flow statement the changes in working capital are not prepared where as a statement of changes in working capital is prepared in fund flow.
In cash flow statement this is a short term financial planning is done and here medium and long term financial planning can be done through fund flow statement.
Cash flow statement is mainly used for preparing cash budgeting and in fund flow is used for preparing capital budgeting.
In cash flow statement this shows changes only in cash position where as in fund statement this is concerned with the changes in working capital between two balance sheet data’s.