Question

Discuss a few basic differences between "cash" concept of funds flow statement and "working capital" concept of funds flow statement.

16 Feb 2026
Answer :
Word Count : 251
The cash concept of a funds flow statement focuses strictly on the movement of cash and cash equivalents during a period. It records inflows and outflows arising from operating, investing, and financing activities, and shows how cash balances change between two balance sheet dates. Under this concept, transactions that do not involve actual cash movement, such as credit purchases or depreciation, are excluded because they do not immediately affect cash position. It is therefore more useful for assessing liquidity and
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