Important Differences between cash and funds

Recently updated on August 20th, 2023 at 11:38 am


Cash in simple terms is ready money; something is available with you physically, for example, coins and banknotes. Cheques, government bonds, marketable securities, or commercial papers are not considered as cash, though.

The cash flow statement is a key document to understand the movement of cash in an organization. It subsequently records the amount of money that has moved in and out of the organization’s accounts over time. The movement of cash may be due to operating, investing, or financing activities. Therefore, the statement is an analytical reconciliation of the opening cash balance and closing balance in a given period. It is among the four most important financial statements for investors. It shows them whether or not there are any potential liquidity problems with the company before investing.


When you pay through cash, you save yourself from paying the service tax. Fund flow is the working capital of a business and includes the net movement of funds.

Cash is instant money, letting you pay for anything that you purchase without the need to go to an ATM.


The fund flow statement records any changes in the company’s net working capital during a given period. The statement can be used to determine the financial position of a company and assists in long-term financial planning. Any irregular financial activity or expense can be detected by studying the fund flow statement. Fund flow is useful to gauge investor sentiment although it is not as comprehensive as a cash flow statement. Some of the most popular funds invested in other entities are- Employees Provident Fund, Shareholder’s Fund, Workmen Compensation Funds, Creditors Fund, and more.


  • Funds are usually safe and are protected against insolvency.
  • Funds are always transparent. The providers make sure to talk about the details of each of the funds.
  • Funds are quite flexible. They have different plans that will suit different people with their needs and budget.
Cash Fund
Meaning Coins and cash are considered to be money. Anything that can be use right away and is recognized by the Government is cash. Funds can be money, and can be other liabilities as well, for example, different financial resources like bank balance, cheques, and more.
Type Asset Liabilities
Constituents Money Credit, Money, Cheque
Scope Narrow Wide
Cash Flow Fund Flow
Meaning A cash flow statement is a statement showing the inflows and outflows of cash and cash equivalents over a period. A fund flow statement is a statement showing the changes in the financial position of the entity in different accounting years.
Purpose of Preparation To show the reasons for movements in the cash at the beginning and at the end of the accounting period. To show the reasons for the changes in the financial position, with respect to previous year and current accounting year.
Basis Cash Basis of Accounting. Accrual Basis of Accounting.
Analysis Short Term Analysis of cash planning. Long Term Analysis of financial planning
Discloses Inflows and Outflows of Cash Sources and applications of funds

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