Explanation:

Funds Flow Statement is neither a substitute of Income Statement nor a Balance Sheet.

• Profit and Loss Account presents the results of the operation, i.e. the profit or loss of a firm, i.e. it does not exhibit the changes of financial position and, at the same time, it does not indicate the inflows and outflows of funds for a particular period although it gives some valuable information about performance of a firm.
• A Balance Sheet, on the other hand, presents the financial position of a firm at a particular date. Since Balance Sheet is prepared at a particular date, it is a static one, but a funds flow statement is dynamic in nature.
• A funds flow statement presents various information about the financial resources of a firm, i.e. the various sources of funds and the application for the same and exhibits also the changes in assets and liabilities by which the analyst can understand the reasons therefor, which is not done by a Balance Sheet.
• Moreover, Balance Sheet is the final outcome of all financial transactions at a particular date. But a funds flow statement is a Post-balance Sheet activity which is done by an analyst. It also supplies information relating to various sources of funds and their applications