Tag: preparation of cash flow statement

Questions Related to preparation of cash flow statement

Cash and Cash Equivalents used is known as _________ of Cash.

  1. inflow

  2. outflow

  3. receiving

  4. none of these


Correct Option: B

Cash Flow Statement ignores fundamental accounting __________ .

  1. concept

  2. principle

  3. policy

  4. all of the above


Correct Option: A

Cash comprises of ________________.

  1. Cash on hand

  2. Demand deposits with banks.

  3. Both (a) and (b)

  4. None of the above


Correct Option: C
Explanation:

Cash is money in the form of currency, which includes all bills, coins, and currency notes. A demand deposit is a type of account from which funds may be withdrawn at any time without having to notify the institution. 


Examples of demand deposit accounts include checking accounts and savings accounts.

Which of the following is not the example of cash equivalents?

  1. Treasury bills

  2. Commercial papers

  3. Debtors

  4. Money market funds


Correct Option: C

Cash Flow Statement facilitates to determine Cash Flow from ____________ activities.

  1. operating

  2. investing

  3. financing

  4. all of the above


Correct Option: D

Financing Activities are the activities that result in changes in the size and composition of the owner's capital and borrowings of the company.

  1. True

  2. False


Correct Option: A
Explanation:

Financing activities are activities that result in changes in the size and composition of the owners' capital and borrowings of the enterprise. e.g., cash proceeds from issue of equity shares, debentures, raising long-term loans, repayment of bank loans, etc. Cash proceeds from issuing shares (equity / preference).

Cash Equivalents are short-term, highly liquid investments that are readily convertible into known amount of cash and which are subject to an insignificant risk of change in value.

  1. True

  2. False


Correct Option: A

Which of the following are included in investing activities?

  1. Sale of machnery.

  2. Purchase of furniture

  3. Loans and advances to third parties.

  4. All of the above


Correct Option: D

Cash received from sale of goods is not an operating activity.

  1. True

  2. False


Correct Option: A
Explanation:

Some common operating activities include cash receipts from goods sold, payments to employees, taxes, and payments to suppliers.This means that the issuance of stock or bonds by a company are not counted as operating activities.

a) A decrease in current liabilities increases working capital
b) Funds flow refers to change in long-term funds.
Of these

  1. Both (a) and (b) are true

  2. Both (a) and (b) are false

  3. (a) is true, but (b) is false

  4. (a) is false but (b) is true


Correct Option: A
Explanation:

(a) If a transaction increases current assets and current liabilities by the same amount, there would be no change in working capital, While decrease in Current liabilities increases working capital.

(b) Fund flow statements deals with the transactions which change either the amount of current assets and current liabilities (in the form of decrease or increase in working capital) or fixed assets, long-term loans including ownership fund.