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Cash flow Statement show the changes in the cash position (inflow and outflow) of a firm
Fund flow statement that show the ups and down of the financial position and changes in working capital of the equity between the two financial years.
It is important for the company because financial position of any company can be understood with the help of cash flow statement and fund flow statement along with Balance sheet and profit and loss account.
* Funds flow statement is a prepared to analyse the reasons for changes in the financial position of a company between the two statements of financial position. It shows the inflow and outflow of funds i.e sources and application of funds for a particular period. In other words , a funds flow statement is prepared to explain the changes in the working capital position of a company.
* Funds flow statement is based on the accrual system of accounting. In the case of cash flow statement only the transactions effecting cash or cash equivalents are taken into account.
* Funds flow statement analyses the sources and application of funds of long term nature and net increase or decrease in the long term funds will be reflected on the working capital of the firm. The cash flow statement only considers the increase or in current assets or current liabilities in calculating the cash flow of funds from operations.
* Funds flow statement is more useful for long term financial planning. Cash flow analysis is more useful for identifying and correcting the liquidity problems of the company.
* Funds flow statement tallies the funds generated from various sources with various uses to which they are put. Cash flow statement starts with the opening balance of cash and reaches to the closing balance of cash.
Importance for a company.
Both funds flow statement and cash flow statement are used in analysis of part transactions of a business firm.
