What is the difference between cash flow and fund flow?

"A good example explains it all" You want to start a Tea business, you borrow Rs500, You purchase Rs350 worth of "goods" required to make tea; Sugar, tea etc.
Now you have500 = Liability,150 = Cash (Current Asset) and350 = Stock Any change in ( Stock + Cash) from "1 PERIOD TO ANOTHER" is Fund flow and any change in (cash only) from "1 PERIOD TO ANOTHER" is Cash flow.

Cash Flow Statement : Cash flow statement is prepared from the transactions affecting cash and cash equivalents only. Taking in to account all sources and uses of cash, it starts with the opening balance of cash and cash equivalents and reaches the closing balance of cash and cash equivalents,. Cash flow statements are useful to identify the current liquidity problems which are to be corrected.

 

Methods of cash flow:

1. Direct Method : presenting information in Statement ofA. operating ActivitiesB. Investment Activities C.Financial Activities

 2. Indirect Method :uses net income as base & make adjustments to that income(cash & non-cash)transactions.

 

Funds Flow Statement : Fund flow statement analyses the sources and application of funds of long term nature and the changes in working capital. It tallies funds generated from various sources with various uses to which they are put. It is based on accrual accounting system and very useful for long range financial planning.

 

Major Difference:

 

The Cash Flow S tatement allows investors to understand how a company's operations are running, where its money is coming from, and how it is being spent.

 

Fund Flow Statement is showing the fund for the future activites of the Company.