Hi Sunil,
I think I am too late to answer your question. Please find my answer:
Cash Flow:
It measures the actual inflow and outflow of cash. It does not consider any accruals.
When drafting a cash flow, you start with the opening balance of cash and summarize the receipts and payments, and the resultant figure is the closing balance of cash.
Funds Flow:
It measures the working capital of the company, which is the excess of current assets over current liabilities.
Consider depreciation: Though an entry is made in the P&L account, cash does not go out (it is actually a book entry). Therefore, when preparing a funds flow statement, you have to add this amount to profit.
Similarly, when you sell an asset, you have to account for the profit or loss on the sale of the asset. You take into account the book value of the asset and find the difference from the sale value to estimate your profit. Therefore, if you had accounted for a loss, it is again a book entry only and has to be added back to profits.
In the cash flow, you would have considered the actual cash that had come in from the sale of the asset.
Moreover, when working out funds flow, you start from the opening balance of accumulated profits and end with the closing balance.
Another way of working the funds flow through the balance sheet is by finding the difference between the current assets and current liabilities.
Please get back if you require more clarity.