Difference Between Cash Flow and Fund Flow

Cash Flow and Fund Flow Differences

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.

• The cash flow statement is one of the four important financial statements every investor should look at, and it is quite prevalent and useful when one wants to know about the liquidity position of a company.
• On the other hand, the fund flow statement talks about the financial position of a company in a given period of time. It talks about sources of funds and the application of funds.

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Cash Flow vs Fund Flow Infographics

Key Differences Between Cash Flow and Fund Flow

• The cash flow statement is one of the four financial statements that every investor looks at to understand the financial position of a company. The fund flow statement, on the other hand, isn’t a financial statement.
• The cash flow statement is prepared so that at the end of a particular period, the net cash flow of the company can be calculated. Fund flow statement is prepared to see the sources and uses of funds during a particular period and how that “change in the funds” affects the working capital of the company.
• The cash flow statementCash Flow StatementStatement of Cash flow is a statement in financial accounting which reports the details about the cash generated and the cash outflow of the company during a particular accounting period under consideration from the different activities i.e., operating activities, investing activities and financing activities.read more is created by following a cash basis of accounting. The fund flow statement, on the other hand, is created by following the accrual basis of accounting.
• The cash flow statement is used for cash budgetingCash BudgetingCash budget refers to cash inflows and outflows estimations made by a company's management over a given period to evaluate whether the business has adequate cash & cash equivalents to meet its operational needs in the coming future.read more. Fund flow statementFund Flow StatementFund flow statement is a statement that compares the two balance sheets by analyzing the sources of funds (debt and equity capital) and the application of funds (assets) and its reasons for any differences. It helps the company see through where their money has been spent and from where they have received the money (long-term funds raised by issues of shares, debentures, and sale of non-current assets).read more is used for capital budgeting.
• The cash flow statement is prepared to see the short-term effect of cash flow. Fund flow statement is prepared for the long-term purpose.

Comparative Table

Basis for Comparison		Cash Flow		Fund Flow
Inherent meaning		Cash flow is based on a narrow concept called “cash.”		Fund flow is based on a wider concept called “working capital.”
Usefulness		The utility of the cash flow statement is to find out the net cash flow.		The utility of fund flow is to understand the financial position of the company.
Source		The cash flow statement starts with opening balance and after adjustments come out with net cash inflow/outflow.		The fund flow statement calculates the difference between sources of funds and the application of funds.
WC shown		Shown in the operating activitiesOperating ActivitiesOperating activities generate the majority of the company's cash flows since they are directly linked to the company's core business activities such as sales, distribution, and production.read more of the cash flow statement;		Shown in the statement of changes in working capital;
Type of accounting		Follows the cash basis of accountingCash Basis Of AccountingCash Basis Accounting is an accounting method in which all the company's revenues are accounted for only when there is an actual cash receipt, and all the expenses are recognized when they are paid. Small companies and individuals generally follow this accounting method.read more;		Follows the accrual basis of accountingAccrual Basis Of AccountingAccrual Accounting is an accounting method that instantly records revenues & expenditures after a transaction occurs, irrespective of when the payment is received or made. read more;
Effect		Through cash flow analysis, we get to know the net cash flow.		Through fund flow analysis, we get to know the change in working capital.
Is it a financial statementFinancial StatementFinancial statements are written reports prepared by a company's management to present the company's financial affairs over a given period (quarter, six monthly or yearly). These statements, which include the Balance Sheet, Income Statement, Cash Flows, and Shareholders Equity Statement, must be prepared in accordance with prescribed and standardized accounting standards to ensure uniformity in reporting at all levels.read more?		Yes.		No.
Term		Short term analysis of cash flow;		Long term analysis of working capital;
Used for		Cash budgeting.		Capital budgeting.

Conclusion

If we compare between cash flow and fund flow, cash flow is more prevalent among investors and more used. But if we look at separately, we will see that both of them serve a meaningful purpose.

Cash flow serves a company and its investors and potential investors by showing exactly how much cash is getting injected into the company and how much cash is being paid. On the other hand, fund flow statement helps a company set up a capital budgetCapital BudgetCapital budgeting is the planning process for the long-term investment that determines whether the projects are fruitful for the business and will provide the required returns in the future years or not. It is essential because capital expenditure requires a considerable amount of funds.read more and take necessary steps regarding the specific items which affect the “sources & uses of funds” in the company.

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