Tag: accountancy

Questions Related to accountancy

Cash Flow Statement does not disclose the ________ .

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

  1. cash inflow

  2. cash outflow

  3. financial position

  4. none of the above

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Correct Option: C

Investing Activities are the acquisition and disposal of long-term assets and other investments included in cash equivalents.

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

  1. True

  2. False

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Correct Option: B

Operating activities are the principal revenue producing activities of the enterprise and other activities that are not investing or financing activities.

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

  1. True

  2. False

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Correct Option: A

Which of the following is not the objective of cash flow statement?

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

  1. To show cash and cash equivalent generated.

  2. To show cash and cash equivalent used.

  3. To show net changes in cash and cash equivalents.

  4. None of the above

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Correct Option: D
Explanation:

The main objective of preparing cash flow statement for a particular accounting period is to present information regarding inflow and outflow of cash, cash and cash equivalent generated , used, and net changes in cash flows.

Besides,

It presents the investment and financial activities of a concern for a particular period. It also fulfills the following objectives;

  • Ensuring future positive cash flow of particular concern.
  • Ensuring capacity of an organization to pay a dividend.
  • Identifying non-cash items ensuring cash income and expenses of a concern.
  • Comparing various items of the current year with those of last year.

Which of the following is not the limitation of cash flow statement?

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

  1. Non-cash Trasactions are not reported.

  2. Not a substitute for Income Statement.

  3. Not a sustitute for Balance sheet.

  4. Comparative study.

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Correct Option: D

Cash Flows are the ____________ of Cash and Cash Equivalents.

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

  1. inflows

  2. outflows

  3. both (a) and (b)

  4. none of the above

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Correct Option: C

Financial statement analysis helps to identify the areas where the managers have been efficient and the areas where they have been lacking behind.

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  1. True

  2. False

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Correct Option: A
Explanation:

True. Financial statements helps to understand the financial position of the company. It helps to understand the deviation between the actual position and the position that the company had planned. By looking at the deviation the company can understand how efficiently the managers have worked. 

In periods of inflation, accounting depreciation is ______________ relative to replacement cost and real economic income is ______________.

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  1. overstated, overstated

  2. overstated, understated

  3. understated, overstated

  4. understated, understated

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Correct Option: C

Financial Analysis does not help the users of the financial statements to understand the complicated matters in simplified manner.

trend analysis tools for financial analysis analysis of financial statements financial statement analysis accountancy

  1. True

  2. False

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Correct Option: A
Explanation:

False. Financial Analysis helps the users of the financial statements to understand the complicated matters in a simplified manner. Financial analysis is reviewing and analyzing of financial data, understand the past, present and future projected data. 

It gives a useful insight to the users as to what is the condition of the company.

On the basis of financial analysis, earning capacity of the enterprise cannot be assessed or computed.

trend analysis tools for financial analysis analysis of financial statements financial statement analysis accountancy

  1. True

  2. False

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Correct Option: B
Explanation:

False. On the basis of financial analysis, earning capacity of the enterprise can be assessed or computed. Financial analysis means analysing the financial statements of the firm to make financial decisions. It helps in assessing the earning capacity, present position, past performance, managerial efficiency and helps in inter-firm comparison.