In financial accounting, the statement of cash flows shows how a company’s cash changes from one period to the next. Fund flow can mean two things such as one is accounting, and the other is for investments. Cash flow and fund flow are essential ideas in accounting that help check how much cash a company has. They are two different reports that focus on different things and serve different purposes in a business.
Cash Flow
Cash flow and fund flow are different in certain situations. Cash flow is the money coming in and going out of a business over a specific time. It is shown in the cash flow statement, an essential financial report. The sources of cash flow include:
- Cash from Operating Activities
Money earned or spent from central business activities, such as sales and expenses.
- Cash from Investing Activities
More generally, money is generated from purchases or sales of equipment or investments.
- Cash from Financing Activities
Money gained or used from financial actions like taking loans, issuing shares, or paying off debt.
These show how cash moves through a business. To understand this properly, taking accounting courses online will help learners get a clear view of cash flow.
Fund Flow
Fund flow shows how a company’s working capital changes over time. A fund flow statement helps track these changes; investors use it to see where money should be invested. There are two main sources of funds in a business:
- Money earned from business operations
- Money raised by selling shares or fixed assets
Cash Flow vs. Fund Flow
Let’s read about difference between cash flow and fund flow;
| Aspect | Cash Flow | Fund Flow |
| Definition | Tracks the inflow and outflow of cash and cash equivalents during a period. | Tracks changes in working capital over a period of time. |
| What is calculated? | Cash from business operations. | Funds from business operations. |
| What it shows | Shows the short-term cash position of the business. | Shows the long-term financial position of the business. |
| Purpose | To show cash movement between the start and end of an accounting period. | To show changes in financial position between previous and current periods. |
| Discloses | Cash inflows and outflows. | Sources and uses of available funds. |
| Accounting Basis | Cash basis of accounting. | Accrual basis of accounting. |
| Part of Financial Statement | Yes. | No. |
| Used for | Cash budgeting. | Capital budgeting. |
There are certain differences there in Cash flow and fund flow. The Cash flow statement indicates how much cash was available in a business at some point in time. It means its source and usage and how all these changes impact the company’s working capital. This statement is prepared based on cash accounting, which only recognizes money procurements and payments. The fund flow statement uses the accrual accounting system. Some events, such as revenues or expenses, can accrue to a particular period in the business even if no actual cash was exchanged.
The key difference between cash flow and fund flow is that the cash flow statement helps to plan when cash is needed, while the fund flow statement is used to plan big investments. To learn more about cash and fund flow, consider joining accounting professional courses that help learners acquire more knowledge in the accounting industry.
