Tag: preparation of cash flow statement

Questions Related to preparation of cash flow statement

AS-2 is not applicable in case of ___________.

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

  1. plantation products

  2. work-in-progress

  3. raw material

  4. stores

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Correct Option: A

Which of the following change(s) does / do not appear in a cash flow statement?

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

  1. Issue of equity shares

  2. Conversion of all FCDs into equity shares

  3. Bonus issue of equity shares

  4. All of the above

  5. Both (B) and (C)

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Correct Option: E

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

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

  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.

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Correct Option: C
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.

Cash withdrawal by the proprietor would cause _______.

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

  1. Cash in hand to decrease

  2. External liability to decrease

  3. Total liabilities to increase

  4. Total assets remain unchanged

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Correct Option: A
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.  

Purchase of fixed assets is classified as ______________.

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

  1. Cash flow from operating activity

  2. Cash flow from investing activity

  3. Cash flow from financing activity

  4. None of these

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Correct Option: B

Cash from investing activities arise from _____________________.

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

  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

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Correct Option: A

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

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

  1. Cash flow from financing activity

  2. Cash flow from operating activity

  3. Cash flow from investing activities

  4. None of the above

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Correct Option: A

Redemption of debenture is a / an _______________.

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

  1. Operating activities

  2. Investing activities

  3. Financing activities

  4. None of these

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Correct Option: C

The term 'funds' as used in fund flow statement means ________________.

elements of business statement of changes in financial position preparation of cash flow statement cash flow statement finance

  1. Cash

  2. Current assets

  3. Current liabilities

  4. Current assets and liabilities

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Correct Option: B
Explanation:

Fund flow statement is a statement of cash inflows and cash outflows. There are persons who feel that the funds are cash or working capital which represent the excess of current assets over current liabilities. The term flow means movement and includes both inflows and outflows of resources.And the funds used in the flow statement is a current assets.

Decrease in working capital appear in fund flow statement in _________ side.

commercial studies statement of changes in financial position preparation of cash flow statement cash flow statement finance

  1. Sources

  2. Application

  3. Both (A) and (B)

  4. None of the above

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Correct Option: A
Explanation:

Working capital is current assets less current liabilities. A decrease in the net current assets leads to increase in fund flow which needs to be included. Hence, It appear in sources.