Question 1

Increase in working capital is-----------------------&#10;A)Source of fund&#10;B)Application of fund&#10;C)Funds from operation&#10;D)Loss from operation

Accepted Answer

An increase in working capital is considered an application of funds because it represents money used to fund current assets, such as inventory or receivables, which does not immediately contribute to cash flows.

Question 2

Salaries Rs.20000,depreciation for the period is Rs.30000 other operating expenses are Rs.9000, net loss for the period is Rs.5000 fund generated from operation is------------------&#10;A)Rs.25000&#10;B)Rs.15000&#10;C)Rs.35000&#10;D)Rs.14000

Accepted Answer

Fund generated from operations is calculated by adding back non-cash expenses (like depreciation) and deducting non-operating incomes from the net loss. Here, the net loss is Rs.5000. Adding back depreciation (Rs.30000) and other operating expenses (Rs.9000) to the net loss gives us Rs.5000 (loss) + Rs.30000 (depreciation) + Rs.9000 (other operating expenses) = Rs.39000. However, salaries are an operating expense and should have been included in the calculation of net loss, indicating a misunderstanding in the question's setup. The correct approach to find the fund generated from operations is to adjust the net loss with the depreciation since it's a non-cash expense. Thus, Rs.5000 (net loss) + Rs.30000 (depreciation) = Rs.25000.

Question 3

Stock at the end results in-----------------------&#10;A)Application of fund&#10;B)Source of fund&#10;C)Inflow of fund&#10;D)None of these

Accepted Answer

An increase in stock at the end of an accounting period is considered a source of fund because it represents an increase in current assets without an immediate outflow of cash, implying that funds were generated internally through operations.

Question 4

Depreciation is a source of fund-------------------&#10;A)Yes&#10;B)No&#10;C)Both yes or no&#10;D)None of these

Accepted Answer

Depreciation is considered a source of funds because it is a non-cash expense that reduces net income but does not involve an actual outflow of cash. It generates funds within the business by reducing the taxable income, thereby conserving or retaining cash within the business.

Question 5

Stock in the beginning results in-----------&#10;A)Application of funds&#10;B)Source of fund&#10;C)Inflow of fund&#10;D)None of these

Accepted Answer

The answer of Stock in the beginning results in-----------&#10;A)Application of...

Question 6

Which of the following does not affect the fund flow statement&#10;A)Issue of shares&#10;B)Borrowing&#10;C)Repayment of loan&#10;D)Payment to creditors

Accepted Answer

Payment to creditors is related to the working capital and affects the cash flow statement rather than the fund flow statement. The fund flow statement focuses on the changes in financial position due to long-term financing activities, such as issue of shares (A), borrowing (B), and repayment of loans (C), rather than short-term operational activities like payments to creditors.

Question 7

Which of the following does not affect working capital---------&#10;A)Bank overdraf&#10;B)Debenture&#10;C)Cash&#10;D)Bank

Accepted Answer

Debenture issuance affects long-term financing and does not directly impact current assets or current liabilities, which are the components of working capital. Working capital is primarily concerned with short-term financial health, focusing on assets and liabilities that are expected to be liquidated or settled within a year.

Question 8

Proposed dividend is a--------&#10;A)Current liability&#10;B)Current asset&#10;C)Noncurrent liability&#10;D)Expense

Accepted Answer

Proposed dividends are considered a current liability because they represent an obligation the company plans to settle within the next financial year.

Question 9

Cash flow statement is prepared by taking the ------------- balance of cash&#10;A)Opening balance&#10;B)Closing balance&#10;C)Monthly balance&#10;D)Others

Accepted Answer

Cash flow statement is prepared by taking the opening balance of cash.

Question 10

Decrease in a creditor is a---------------- of cash&#10;A)Inflow&#10;B)No flow of cash&#10;C)Outflow&#10;D)None of these

Accepted Answer

A decrease in a creditor means that the company has paid off some of its debts, resulting in an outflow of cash.

Question 11

Goodwill written off is-----------to the net profit made during the year for calculating the cash from operation&#10;A)Added back&#10;B)Deducted&#10;C)Decreased&#10;D)None of these

Accepted Answer

The answer of Goodwill written off is-----------to the net profit...

Question 12

Provision for tax is shown as a part of-----------activity&#10;A)financing&#10;B)investing&#10;C)operating&#10;D)others

Accepted Answer

The answer of Provision for tax is shown as a...

Question 13

Purchase of fixed asset is classified as------activity&#10;A)financing&#10;B)investing&#10;C)operating&#10;D)others

Accepted Answer

The answer of Purchase of fixed asset is classified as------activity&#10;A)financing&#10;B)investing&#10;C)operating&#10;D)others...

Question 14

Purchase of building by issue of debenture is a---------item and it is ignored in cash flow statement&#10;A)cash&#10;B)non-cash&#10;C)non-operating&#10;D)current

Accepted Answer

The answer of Purchase of building by issue of debenture...

Question 15

Cash flow statement is based on past records, so it is---------in nature&#10;A)historical&#10;B)future item&#10;C)past&#10;D)none of these

Accepted Answer

The answer of Cash flow statement is based on past...

Question 16

Cash equivalent are usually of short term but highly -----------------investments&#10;A)liquid&#10;B)Fixed&#10;C)Changed&#10;D)None of these

Accepted Answer

The answer of Cash equivalent are usually of short term...

Question 17

Cash flow statements (based on AS-3) should be prepared and presented under------------------ method.&#10;A)Direct&#10;B)Indirect&#10;C)Permanence&#10;D)None of these

Accepted Answer

The answer of Cash flow statements (based on AS-3) should...

Question 18

Income tax paid should be shown separately as the cash flows from----------- activities.&#10;A)Financing&#10;B)Investing&#10;C)Operating&#10;D)Others

Accepted Answer

The answer of Income tax paid should be shown separately...

Question 19

Buy back of shares is shown under-----------------------&#10;A)operating activities&#10;B)investing activities&#10;C)financing activities&#10;D)none of these

Accepted Answer

The answer of Buy back of shares is shown under-----------------------&#10;A)operating...

Question 20

Increase in prepaid expenses--------------------cash&#10;A)Increases&#10;B)Added&#10;C)Decreases&#10;D)None of these

Accepted Answer

The answer of Increase in prepaid expenses--------------------cash&#10;A)Increases&#10;B)Added&#10;C)Decreases&#10;D)None of these...

Question 21

Dividend paid are classified under-------------------activities&#10;A)Financing&#10;B)Investing&#10;C)Operating&#10;D)Others

Accepted Answer

The answer of Dividend paid are classified under-------------------activities&#10;A)Financing&#10;B)Investing&#10;C)Operating&#10;D)Others...

Question 22

Cash payment suppliers of goods and services are shown under-------------.&#10;A)Operating&#10;B)Financing&#10;C)Investing&#10;D)None of the above

Accepted Answer

The answer of Cash payment suppliers of goods and services...

Question 23

20,000 equity shares of Rs.10 each issued at 10% premium , cash is Rs-------------------&#10;A)Rs.2,00,000&#10;B)Rs.2,10,000&#10;C)Rs.2,15,000&#10;D)Rs.2,20,000

Accepted Answer

The answer of 20,000 equity shares of Rs.10 each issued...

Question 24

Preliminary expenses written off is--------&#10;A)Cash transaction&#10;B)Non-cash transaction&#10;C)Credit transaction&#10;D)None of the above

Accepted Answer

The answer of Preliminary expenses written off is--------&#10;A)Cash transaction&#10;B)Non-cash transaction&#10;C)Credit...

Question 25

Investment costing Rs.50,000 at the loss of Rs.3,000 cash outflow in investing activity is --------&#10;A)Rs.53,000&#10;B)Rs.50,000&#10;C)Rs.47,000&#10;D)Rs.48,000

Accepted Answer

The answer of Investment costing Rs.50,000 at the loss of...

Deck 6: Fund Flow and Cash Flow Statements