In the context of Accounting for Managerial Decisions, the terms “cash” and “working capital” represent two different concepts of funds used in the preparation and interpretation of a Funds Flow Statement. A Funds Flow Statement is prepared to analyse the sources from which funds are obtained by an organisation and the uses to which those funds are put during a particular accounting period. The meaning of “funds” may vary depending on the concept adopted. Two important approaches are the cash concept and the working capital concept. Understanding the distinction between them is essential for managers because it helps in analysing liquidity, financial resources and changes in the financial position of the business. Under the cash concept of funds, the term “funds” is used in a narrow sense and refers mainly to cash and cash equivalents. According to this approach, a funds flow statement concentrates on changes in the cash position of the enterprise. It records the sources that increase cash and the applications that decrease cash. The primary objective is to explain why the cash balance has increased or decreased during a particular period. For example, cash may be generated from operations, issue of shares, issue of debentures, sale of fixed assets, collection of loans and other sources. On the other hand, cash may be used for purchasing fixed assets, repayment of loans, redemption of shares or debentures, payment of dividends, payment of taxes and other purposes. A cash-based analysis therefore provides information about the actual movement of cash into and out of the business. The cash concept is closely related to the Cash