Tag: preparation of cash flow statement

Questions Related to preparation of cash flow statement

Which one of the following is not a method of credit control?

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

  1. Bank rate policy

  2. Open market operations

  3. Credit deposit ratio

  4. Cash reserve ratio

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Correct Option: D

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

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

  1. Historical in nature.

  2. Discloses Success or Failure of Cash Planning.

  3. Reasons for Cash positions.

  4. Comparative study.

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Correct Option: A

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

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

Cash Flow Statement helps in understanding liquidity and solvency.

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

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