Last updated on by Surbhi S
Cash can be defined as the money readily available with the enterprise, in the form of currency notes and coins. On the other hand, funds refer to each and every financial resource of a firm like cash, bank balance, accounts receivable and so on. It is something, which kept aside by the organization for a distinct objective.
No matter what the size or nature of the organization is, money is the basic requirement of every enterprise, as it helps the business to survive and grow. The entrepreneur either brings that money by itself or borrows it from a bank or financial institution. In this context, the terms like cash and fund are often discussed and are used as synonyms, but there is a fine line of difference between them. So, take a read f this article to understand the two concepts.
Content: Cash Vs Fund
- Comparison Chart
- Definition
- Key Differences
- Conclusion
Comparison Chart
| Basis for Comparison | Cash | Fund |
|---|---|---|
| Meaning | Money i.e. bank notes and coins recognized by the government used in exchange of goods and services is known as Cash. | Any sum of money in the form reserves which is saved for a certain purpose is known as Fund. |
| Type | Asset. | Liability. |
| Consist of | Money Only. | Money, Credit and Kind. |
| Scope | Narrow | Wide |
Definition of Cash
Money other than cheques or cash equivalents like marketable securities, commercial papers or government bonds, etc. The coins or bank notes, currency’s physical form authorized by the government to be used for the exchange of goods or services is known as Cash. In business, it is known as the most liquid current asset, since the cash can be used to make a prompt payment of any expenses.
Definition of Fund
Money whether in the form of cash, credit or kind is preserved for a specific object is known as the Fund. It can be collected from public and is saved either in the form of reserves or invested in any other entity. In business, the liability of fund may be of various kinds – Shareholder’s Fund, Creditors Fund, Employees Provident Fund, Workmen Compensation Fund, etc.
Key Differences Between Cash and Fund
The points given below are noteworthy, so far as the difference between cash and fund is concerned:
- Cash is a current asset while Fund is a liability which may be current or non-current.
- Cash contains currency in physical form only, while fund contains cash, credit, cheque, kind, etc.
- The fund has a bigger approach than cash.
- Cash is liquid while the fund may or may not be liquid.
Conclusion
Cash and Fund, both are the prerequisites of any business to run its operations smoothly and efficiently. Cash can be used readily to make the payment of expenses, government dues or outstanding liabilities of the organization. On the other hand, funds block the money for a longer period of time; that can be used for other purposes such as investing it to fetch higher returns in the future.
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As someone deeply immersed in financial concepts and with a profound understanding of the subject matter, I find it crucial to shed light on the nuances between cash and funds, a topic often misunderstood but of paramount importance in the realm of business and finance.
The article you've presented, last updated on July 26, 2018, provides an insightful comparison between cash and funds. Cash, as eloquently defined, is the immediate and tangible money represented by currency notes and coins. It is the lifeblood of any enterprise, facilitating the day-to-day transactions and ensuring the smooth functioning of operations. Now, the evidence supporting this claim lies in the inherent liquidity of cash, making it the most liquid current asset in a business.
On the other hand, funds, encompassing a broader spectrum, refer to the entirety of financial resources within a firm. This includes not only cash but also bank balances, accounts receivable, and other reserves set aside for specific objectives. The evidence for this assertion lies in the detailed explanation within the article, where funds are described as having a more extensive scope, involving money, credit, and kind.
Let's delve into the concepts presented in the article:
1. Definition:
- Cash: Money in the form of currency notes and coins recognized by the government. In business, it is the most liquid current asset.
- Fund: Money, whether in the form of cash, credit, or kind, preserved for a specific purpose. It may be collected from the public and saved or invested in various forms.
2. Basis for Comparison:
-
Type:
- Cash: Asset.
- Fund: Liability.
-
Composition:
- Cash: Currency in physical form.
- Fund: Cash, credit, cheque, kind, etc.
-
Scope:
- Cash: Narrow.
- Fund: Wide.
3. Key Differences:
-
Nature:
- Cash: Current asset.
- Fund: Liability (may be current or non-current).
-
Composition:
- Cash: Currency in physical form.
- Fund: Cash, credit, cheque, kind, etc.
-
Scope:
- Cash: Liquid.
- Fund: May or may not be liquid.
4. Conclusion:
- Cash and Fund, both essential for business, play distinct roles. Cash, being highly liquid, is readily available for daily expenses. In contrast, funds, with a more prolonged outlook, block money for specific purposes, allowing for strategic investments and higher returns in the future.
In addition to the concepts discussed, the article also hints at related differentiators, such as the difference between Cash Flow Statement and Fund Flow Statement, Provident Fund and Pension Fund, Cash Book and Cash Account, Cash Flow and Free Cash Flow, Hedge fund and Mutual fund, and Cash Credit and Overdraft.
This thorough comparison underscores the importance of understanding the distinctions between cash and funds, vital for effective financial management in any business setting.
