Tag: accountancy

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Questions Related to accountancy

Multiple choice accountancy statement of changes in financial position preparation of cash flow statement cash flow statement finance

An example of cash flow from a financing activity is ___________________.

  1. Receipt of cash from sale of land.

  2. Receipt of cash from collection of accounts receivable.

  3. Payment of cash for acquisition of treasury stock.

  4. Payment of cash for new machinery.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

As per AS-3, financing activities are activities are activities that result in change in the size and composition of the owners' capital and borrowings of the enterprises.

Multiple choice accountancy statement of changes in financial position preparation of cash flow statement cash flow statement finance

Cash withdrawal by the proprietor would cause _______.

  1. Cash in hand to decrease

  2. External liability to decrease

  3. Total liabilities to increase

  4. Total assets remain unchanged
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The owner's capital is the part of the accounting equation that represents the liquid cash that the company has earned, which it has on hand for daily operations as well as capital investments. When a business owner withdraws cash for personal use, these funds come out this capital account. Proprietor withdrawal cash or other asset from business recorded as credit to cash and a debit to the proprietor draws account i.e. cash in hand to decrease.  

Multiple choice accountancy statement of changes in financial position preparation of cash flow statement cash flow statement finance

Purchase of fixed assets is classified as ______________.

  1. Cash flow from operating activity

  2. Cash flow from investing activity

  3. Cash flow from financing activity

  4. None of these
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The purchase of fixed assets involves the outflow of cash for long-term assets, which is categorized under investing activities in a cash flow statement.

Multiple choice accountancy statement of changes in financial position preparation of cash flow statement cash flow statement finance

Cash from investing activities arise from _____________________.

  1. Cash flows on account of dealing in fixed assets and long term investments

  2. Cash flows on account of purchase and sale of goods

  3. Cash flows on account of short term investments

  4. None of the above
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Investing activities in a cash flow statement specifically relate to the acquisition and disposal of long-term assets and other investments not included in cash equivalents.

Multiple choice accountancy statement of changes in financial position preparation of cash flow statement cash flow statement finance

Dividend paid, under AS-$3$, is _______________.

  1. Cash flow from financing activity

  2. Cash flow from operating activity

  3. Cash flow from investing activities

  4. None of the above
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Under AS-3, dividends paid are classified as cash flows from financing activities because they represent the cost of obtaining financial resources (equity).

Multiple choice accountancy statement of changes in financial position preparation of cash flow statement cash flow statement finance

Redemption of debenture is a / an _______________.

  1. Operating activities

  2. Investing activities

  3. Financing activities

  4. None of these
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Redemption of debentures involves the repayment of borrowed capital, which is a cash outflow related to the company's capital structure, thus classified as a financing activity.

Multiple choice accountancy statement of changes in financial position preparation of cash flow statement cash flow statement finance

Which of the following is the limitation of the cash flow statement?

  1. Historical in nature.

  2. Discloses Success or Failure of Cash Planning.

  3. Reasons for Cash positions.

  4. Comparative study.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

A cash flow statement is based on past data (historical), which means it does not necessarily reflect the future cash position or current financial health, making it historical in nature.

Multiple choice accountancy statement of changes in financial position preparation of cash flow statement cash flow statement finance

Short-term Investments and Marketable Securities are included in Cash and Cash Equivalent.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

According to accounting standards, cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and are subject to an insignificant risk of changes in value.

Multiple choice accountancy statement of changes in financial position preparation of cash flow statement cash flow statement finance

Cash Flow Statement helps in understanding liquidity and solvency.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The cash flow statement provides information about the cash generated and used by an enterprise, which is essential for assessing its liquidity (ability to pay short-term debts) and solvency (ability to meet long-term obligations).