What is Cash?
Money other than checks or cash equivalents, such securities, commercial paper, government bonds, etc. A physical form of currency approved by the government for use in the exchange of goods or services, such as coins cash bills. In business, it is known as the most liquid asset because it can quickly pay off all expenses using cash.
Cash is the most important record of a company. Cash is recorded in the statement of cash flows, which is one of the most important financial statements in accounting.
On the other hand, the cash flow statement already contains this information and provides a more accurate picture of how much money the company is generating. Sources of cash can be divided into three different categories in the statement of cash:
Operational activities
Cash flows generated by the normal or core operations of the business would be reported in this category.
Investment activities
This section would include any cash spent on investments such as new equipment.
Funding activities
This category includes all transactions involving borrowers, such as proceeds from new debt or dividends paid to investors.
What is Fund?
Money held for a specific purpose, such as cash, credit or physical, is called a fund. It is collected and saved in the form of reserves or invested in another facility. In business, there are different types of fund liabilities, such as shareholder funds, creditor funds, employee provident funds, and worker’s compensation funds.
Funds are primarily used by accountants to report any change in a company’s net working capital or the difference between assets and liabilities over a period of time.
Funds relate to a company’s working capital and a fund flow statement is prepared to visualize changes in a company’s working capital over a period of time. Investors use information about the flow of funds to determine where capital should be invested.
There are two types of inflow of funds in business.
- Funds are generated by business activities .
- Long-term funds obtained through the issue of shares or the sale of fixed assets.
Difference Between Cash and Fund
The concept of cash and funds is central to the discipline of accounting. It is advantageous to assess the liquid position of the company. Cash and fund are two different statements that have different purposes and serve different purposes in business.
Cash is a current asset, whereas funds are short-term or long-term liabilities. Cash includes only currency in physical form, while funds include cash, loans, checks, and in kind. Funds have a larger than cash approach. Funds may or may not be liquid, but cash is liquid.
Cash can easily be used to pay off expenses, government dues, or outstanding debts of an organization. Funds, on the other hand, block money for longer periods of time. It can be used for other purposes, such as investing in higher future returns.
Comparison Between Cash and Fund
| Cash | Fund |
| Banknotes and coins recognized by the government are used in the exchange of goods and services. | Any amount in the form of reserves that is held for a specific purpose. |
| The short-term position of the company is displayed. | The long-term position of the company is displayed. |
| Showing the movement of cash at the beginning and end of the accounting period. | Showing changes in the company’s financial position between the previous and current accounting periods. |
| Cash is related to inflows and outflows. | Source and use of available funds. |
| Cash is a part of financial statements. | Fund is not a part of the financial statement. |