Every business needs money to run. To even think about running a business, the first thought that will come to anyone’s mind is how much money will be required.
Now to let the business survive and grow, a business person might borrow loans from family members or banks; it is in this context that people use both the terms cash and funds interchangeably.
People often confuse between cash and fund and tend to use the term simultaneously in different circumstances. But what you need to know is that cash and funds are two different terms, even though both of them include money.
Cash vs Fund
The difference between cash and fund is that cash is something that you have within the enterprise in the form of coins or cash to spend. But funds, on the other hand, refers to all types of financial resources. These can be bank balance, cash, equity, property, and more. Funds are something that you can’t spend and are typically kept aside for specific purposes and objectives.
Comparison Table Between Cash and Fund (in Tabular Form)
| Parameter of Comparison | Cash | Fund |
|---|---|---|
| Meaning | Coins and cash are considered to be money. Anything that can be use right away and is recognized by the Government is cash. | Funds can be money, and can be other liabilities as well, for example, different financial resources like bank balance, cheques, and more. |
| Type | Asset | Liabilities |
| Consist of | Money | Credit, Money, Cheque |
| Scope | Narrow | Wide |
What is Cash?
Cash in simple terms is ready money; something is available with you physically, for example, coins and banknotes. Cheques, government bonds, marketable securities, or commercial papers are not considered as cash, though.
Any physical form of money that is authorized by the Government and that can be used in an exchange of various services or goods is called as cash.
Cash is commonly termed as a liquid current asset, mainly in businesses, because you can use it to make payment for almost anything. You can purchase goods with the help of money, or else spend it to clear different debts.
Advantages
- Cash is instant money, letting you pay for anything that you purchase without the need to go to an ATM.
- When you pay through cash, you save yourself from paying the service tax.
Paying by cash means less stress and hassle and also minimum bookkeeping efforts.
What is Fund?
Unlike cash, any form of money, for example, bank balance, accounts receivable, cheques, and even cash, can be termed as funds. Funds are considered to be liabilities.
They are collected from the public and can be invested in a different entity, or else saved as reserves to use it later.
Some of the most popular funds invested in other entities are- Employees Provident Fund, Shareholder’s Fund, Workmen Compensation Funds, Creditors Fund, and more.
Advantages
- Funds are usually safe and are protected against insolvency.
- Funds are quite flexible. They have different plans that will suit different people with their needs and budget.
- Funds are always transparent. The providers make sure to talk about the details of each of the funds.
Cash is for immediate use, but funds may not always be for immediate use.
Main Differences Between Cash and Fund
- Cash is known as a liquid asset, which means you can use it to buy different items, whereas funds are liabilities. You may not be able to use it now, but the return is always good.
- Money and coins, basically money that is available in physical form, is known as cash; however, funds can’t and sometimes can be seen — for example, cash, cheque, credit, and more.
- Fund always has a higher return and approach than cash.
- Cash is for immediate use, but funds may not always be for immediate use.
Conclusion
For a business, the top two requisite things are cash and funds. You need cash for an immediate expense, and you need funds to use it when the time comes.
Through the cash, you will be able to make all types of purchases, make payments for different things, pay government dues, and more.
However, through funds, you will be able to block a certain amount of money so that you can use it later.
Funds can also be used later to invest in different types of investment, like bonds, property, equities, and more.
