Cash Flow Statement vs Fund Flow Statement
A cash flow statement tracks movements of cash and cash equivalents across operating, investing and financing activities. A fund flow statement tracks changes in working capital between two balance sheet dates.
The quick answer
Cash flow answers 'where did the cash go?' Fund flow answers 'how did working capital change?' Cash flow is a required statement under accounting standards; fund flow is an analytical tool.
Side-by-side comparison
| Basis | Cash Flow Statement | Fund Flow Statement |
|---|---|---|
| Basis | Cash and cash equivalents | Working capital |
| Statutory requirement | Required under accounting standards | Not a required statement; analytical only |
| Classification | Operating, investing and financing activities | Sources and applications of funds |
| Period focus | Movement during the period | Change between two balance sheet dates |
| Reveals | Liquidity and cash-generating ability | Changes in financial position and working capital |
| Non-cash items | Excluded from cash movements | May affect funds without affecting cash |
The exam angle
A frequent trap: a transaction can increase funds without increasing cash — for example, a credit sale increases working capital but not cash. Identify which statement the question is asking about before classifying anything.
Related comparisons
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Talk to usIs the fund flow statement still examined?
Its treatment varies by scheme and level. Confirm against the ICAI study material applicable to your attempt — cash flow statements are the statutory requirement and receive the greater emphasis.
Which activities include interest and dividend?
Classification depends on whether the entity is a financial institution and on the framework applied. State your classification basis in the answer, as examiners award the reasoning.
Can a profitable company have negative operating cash flow?
Yes — commonly through rising receivables and inventory. This divergence between profit and cash is precisely what the cash flow statement is designed to reveal.
You have read the table. Now answer five questions on it.
Recognition fades; retrieval sticks. Generate an MCQ set on this exact concept and test whether the distinction holds under pressure.
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