Q.Distinguish between a Cash Flow Statement and a Funds Flow Statement.

Both are statements of financial flow prepared from two balance sheets, but a cash flow statement deals with cash and cash equivalents while a funds flow statement deals with working capital.

Both statements are prepared from two consecutive balance sheets and both explain financial flows, but they differ fundamentally in the meaning of the word 'funds'. A cash flow statement concerns only cash and cash equivalents; a funds flow statement concerns the wider concept of working capital (current assets minus current liabilities).

Students often state that both statements measure the same thing 'in different words' — the substantive difference (cash vs working capital) must be brought out. Forgetting that a funds flow statement needs a separate 'Schedule of …