3.1.3.10 Cash Flow Analysis Vs. Funds Flow Analysis A cash flow statement is concerned only with the changes in cash position while funds flow analysis is concerned with changes in working capital position between two balance sheet dates Cash flow analysis is a tool of short-term financial analysis while the funds flow analysis is comparatively a long-term one. Cash is part of working capital and therefore an improvement in cash position results in improvement in the funds position but not vice versa. In other words "Inflow of cash results in "inflow of funds" but inflow of funds may not necessarily result in "inllow of cash In funds flow analysis, the changes in various current sets and current liabilities are shown in a separate statement called schedule of changes in working capital in order to ascertain the net increase or decrease in working capital But in cash flow analysis, such changes are adjusted to funds from operations in order to ascertain cash from aperations 16 3.1.3.11 illustrations Illustration 3 From the following balances calculate cash from operations December 31 2010 2011 Profit and loss a/c balance 75.000 1.55,000 Debtors 45.000 2.000 Creditors 20.000 26.000 Bills receivable 12.000 15,000 Cash in hand 2.500 3,000 Prepaid expenses 1.600 1.400 Bills payable 18.000 16,000 Cash at bank 8.000 10.000 Outstanding expenses 1.200 Income received in advance 250 300 Outstanding income 800 Additional Information () depreciation written off during the year 15.10,000 transfer to general reserve 10.000 1.600 900 171