Question 1

In case of other enterprises cash flow arising from interest paid should be classified as cash flow from ________ while dividends and interest received should be stated as cash flow from ____.
A)operating activities, financing activities
B)financing activities, investing activities
C)investing activities, operating activities
D)none of the above

Accepted Answer

In the case of other enterprises, interest paid is often considered a financing activity because it relates to the cost of obtaining financial resources. Dividends and interest received are typically classified as investing activities because they are returns on investments in financial assets.

Question 2

When a fixed asset is bought as hire purchase, interest element is classified under ______ and loan element is classified under________.
A)operating activities, financing activities
B)financing activities, investing activities
C)investing activities, operating activities
D)none of the above

Accepted Answer

The interest element of a hire purchase agreement is classified under financing activities because it relates to the cost of borrowing funds. The loan element (principal repayment) is classified under investing activities because it represents the acquisition of a fixed asset.

Question 3

Which of the following statements are false?
A)old furniture written off doesn't affect cash flow.
B)cash flow statement is a substitute for cash account.
C)appropriation of retained earnings is not shown in cash flow statement.
D)net cash flow during a period can never be negative.

Accepted Answer

B

Question 4

Which of the following is not a cash outflow?
A)increase in prepaid expenses
B)increase in debtors
C)increase in stock
D)increase in creditors

Accepted Answer

An increase in creditors indicates that a company owes more to its suppliers or creditors, which is a liability. This is not a cash outflow because it represents money that the company has not yet paid out; instead, it is an obligation that will be settled in the future.

Question 5

Cash flow statement is prepared for financial planning of
A)long range
B)medium range
C)short range
D)very long range

Accepted Answer

Cash flow statements are typically used for short-range financial planning, allowing businesses to plan and manage their cash inflows and outflows over a short period, such as a month or a quarter, to ensure they have enough cash to cover their obligations.

Question 6

Which of the following is source of cash?
A)cash deposited into bank
B)cash withdrawn from bank
C)sale of goods costing ?10,000 for ?8,000
D)sale of marketable securities for cash

Accepted Answer

D  Sale of goods and sale of marketable securities both generate cash inflow, making them sources of cash.

Question 7

Which of the following is not source of cash?
A)issue of shares
B)purchase of machinery
C)sale of asset
D)dividend received

Accepted Answer

The purchase of machinery is not a source of cash; instead, it is a use of cash. The other options (issue of shares, sale of asset, and dividend received) all bring cash into the business.

Question 8

Which of the following is not application of cash?
A)increase in debtors
B)increase in inventory
C)increase in bills payable
D)increase in prepaid expenses

Accepted Answer

An increase in bills payable does not represent an application of cash; instead, it indicates an increase in the company's liabilities without an immediate outflow of cash.

Question 9

If 6% Pref. share capital ?2,00,000 were redeemed at a premium of 5%, while preparing Cash Flow Statement its effect on cash flow will be :
A)cash used from financing activities ?2,12,000
B)cash received from financing activities ?2,12,000
C)cash used (payment) from financial activities ?2,10,000
D)cash used (payment) from financial activities ?2,00,000

Accepted Answer

The answer of If 6% Pref. share capital ?2,00,000 were...

Question 10

If the amount of goodwill is ?40,000 at the beginning of a year and ?48,000 at the end of that year then while preparing cash flow statement its effect on cash flow will be :
A)cash used (payment) in investing activities ?8,000
B)cash received from operating activities ?8,000
C)cash used (payment) from operating activities ?8,000
D)cash used (payment) from financial activities ?8,000

Accepted Answer

Goodwill is an intangible asset, and any increase in its value (from ?40,000 to ?48,000, an increase of ?8,000) would typically be reflected as cash used in investing activities, as it may indicate investment in acquisitions or similar transactions that increase the company's goodwill.

Question 11

How will you deal increase in the balance of 'Securities Premium Reserve' while preparing a Cash Flow Statement?
A)cash flow from operating activities
B)cash flow from investing activities
C)cash flow from financing activities
D)cash equivalent

Accepted Answer

The increase in the balance of 'Securities Premium Reserve' is related to transactions involving equity financing, such as the issuance of shares at a premium. Therefore, it is classified under cash flow from financing activities in the Cash Flow Statement.

Question 12

A Ltd., engaged in the business of retailing of two wheelers, invested ?50,00,000 in the shares of a manufacturing company. Dividend received on this investment will be :
A)cash flow from operating activities
B)cash flow from investing activities
C)cash flow from financing activities
D)cash equivalent

Accepted Answer

Dividend received on investment is a cash inflow from investing activities.

Question 13

How will you treat Bank Overdraft in a Cash Flow Statement?
A)cash flow from operating activities '
B)cash flow from investing activities
C)cash flow from financing activities
D)cash equivalent

Accepted Answer

Bank overdrafts are considered a form of short-term borrowing and are treated as cash flow from financing activities in a cash flow statement.

Question 14

Where will you show purchase of Goodwill in a Cash Flow Statement?
A)cash flow from operating activities
B)cash flow from investing activities
C)cash flow from financing activities
D)cash equivalent

Accepted Answer

The purchase of Goodwill is considered an investment in intangible assets and is therefore shown under cash flow from investing activities in a Cash Flow Statement.

Question 15

How will you treat payment of 'Interest on Debentures' while preparing a Cash Flow Statement?
A)cash flow from operating activities
B)cash flow from investing activities
C)cash flow from financing activities
D)cash equivalent

Accepted Answer

Interest on Debentures is considered a financing activity because it relates to the costs of obtaining financial resources.

Question 16

State whether cash deposited in bank will be classified under which kind of activity?
A)cash flow from operating activities
B)cash flow from investing activities
C)cash flow from financing activities
D)no cash flow

Accepted Answer

The answer of State whether cash deposited in bank will...

Question 17

A company has to prepare its balance sheet once in..
A)six months
B)two years
C)a year
D)as and when it needs

Accepted Answer

A company is required to prepare its balance sheet once a year as part of its annual financial statements, in accordance with accounting standards and regulations.

Question 18

Income statement of a business shows…
A)net profit
B)net operating result of specified period
C)net loss
D)none of these

Accepted Answer

The answer of Income statement of a business shows…
A)net profit
B)net...

Question 19

The statement which shows the periodical increase or decrease of funds is called___________ statement.
A)funds flow
B)cash flow
C)income
D)working capital

Accepted Answer

A funds flow statement shows the changes in financial position, indicating the sources and uses of funds over a period, reflecting the increase or decrease in funds.

Question 20

Fund flow statement is based on the concept of…
A)business entity
B)accounting period
C)going concern
D)all of the above

Accepted Answer

The answer of Fund flow statement is based on the...

Quiz 6: Cash Flow Statement and Fund Flow Statement

In case of other enterprises cash flow arising from interest paid should be classified as cash flow from ____ while dividends and interest received should be stated as cash flow from .

When a fixed asset is bought as hire purchase, interest element is classified under and loan element is classified under__.

Which of the following statements are false?

Which of the following is not a cash outflow?

Cash flow statement is prepared for financial planning of

Which of the following is source of cash?

Which of the following is not source of cash?

Which of the following is not application of cash?

If 6% Pref. share capital ?2,00,000 were redeemed at a premium of 5%, while preparing Cash Flow Statement its effect on cash flow will be :

If the amount of goodwill is ?40,000 at the beginning of a year and ?48,000 at the end of that year then while preparing cash flow statement its effect on cash flow will be :

How will you deal increase in the balance of 'Securities Premium Reserve' while preparing a Cash Flow Statement?

A Ltd., engaged in the business of retailing of two wheelers, invested ?50,00,000 in the shares of a manufacturing company. Dividend received on this investment will be :

How will you treat Bank Overdraft in a Cash Flow Statement?

Where will you show purchase of Goodwill in a Cash Flow Statement?

How will you treat payment of 'Interest on Debentures' while preparing a Cash Flow Statement?

State whether cash deposited in bank will be classified under which kind of activity?

A company has to prepare its balance sheet once in..

Income statement of a business shows…

The statement which shows the periodical increase or decrease of funds is called___________ statement.

Fund flow statement is based on the concept of…