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.
To let the business survive and grow, a business person might borrow loans from family members or banks; in this context, people use the terms cash and funds interchangeably.
People often confuse cash and fund and use the term simultaneously in different circumstances. But you need to know that cash and funds are two different terms, even though both include money.
- Cash refers to a physical currency that is readily available for transactions.
- Fund refers to a pool of money for a specific purpose or investment.
- Cash is used for immediate transactions, while funds are invested for future needs.
Cash vs Fund
Cash refers to physical money in the form of banknotes, coins, or electronic currency that is readily available for use in daily transactions, such as paying bills. Fund refers to a pool of money set aside for a specific purpose, such as investment, charitable donations, or savings.
|Parameter of Comparison||Cash||Fund|
|Meaning||Coins and cash are considered to be money. Anything that can be used immediately and recognized by the Government is cash.||Funds can be money and other liabilities, for example, different financial resources like bank balance, cheques, and more.|
|Consist of||Money||Credit, Money, Cheque|
What is Cash?
Cash, in simple terms, is ready money; something is available to you physically, for example, coins and banknotes. However, cheques, government bonds, marketable securities, or commercial papers are not considered cash.
Any physical form of money that the Government authorizes and can be used to exchange various services or goods is called cash.
Cash is commonly termed as a liquid current asset, mainly in businesses, because you can use it to make payments for almost anything. You can purchase goods with the help of money or else spend it to clear different debts.
- Cash is instant money, letting you pay for anything you purchase without needing 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- the Employees Provident Fund, Shareholder’s Fund, Workmen Compensation Funds, Creditors Fund, and more.
- Funds are safe and are protected against insolvency.
- Funds are pretty flexible. They have different plans to suit different people’s needs and budgets.
- 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 a liquid asset, meaning 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, are 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.
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Chara Yadav holds MBA in Finance. Her goal is to simplify finance-related topics. She has worked in finance for about 25 years. She has held multiple finance and banking classes for business schools and communities. Read more at her bio page.