Cash Flow Statement – Corporate and Management Accounting MCQ

Going through the Cash Flow Statement – Corporate and Management Accounting CS Executive MCQ Questions with Answers you can quickly revise the concepts.

Cash Flow Statement – Corporate and Management Accounting MCQs

Question 1.
The term cash includes
(A) Cash and Bank Balances
(B) All the Current Assets
(C) All the Current Liabilities
(D) None of the above
Answer:
(A) Cash and Bank Balances

Cash Flow Statement – Corporate and Management Accounting

Question 2.
“Cash flow statement reveals the effects of transactions involving movement of cash”. This statement is ….
(A) Correct
(B) Not correct
(C) Partially correct
(D) None of the above
Answer:
(A) Correct

Cash Flow Statement – Corporate

Question 3.
Which of the following Accounting Standard deals with preparation of Cash Flow Statement
(A) AS-5
(B) AS – 6
(C) AS-3
(D) AS – 11
Answer:
(C) AS-3

Question 4.
Which of the following method can be used by listed company for preparation of Cash Flow Statement
(A) Direct Method
(B) Indirect Method
(C) Both (A) & (B)
(D) Either (A) or (B)
Answer:
(B) Indirect Method

Question 5.
As per AS-3, Cash includes
(A) Cash in hand and demand deposit with banks
(B) Term deposit with bank
(C) Short term highly liquid investment readily convertible into cash which are subject to insignificant risk of changes in value
(D) Both (A) & (B)
Answer:
(D) Both (A) & (B)

Question 6.
As per AS-3, an investment normally qualifies as a “cash equivalent” only when it has a short maturity of, say, from
the date of acquisition.
(A) 6 months or more
(B) 5 months or less
(C) More than 3 months
(D) 3 months or less
Answer:
(D) 3 months or less

Question 7.
Which of the following can be categorized as cash equivalents as per AS-3
(A) Treasury bill
(B) Commercial paper
(C) Money market funds
(D) All of the above
Answer:
(D) All of the above

Question 8.
As per AS-3, Cash includes
(A) Highly liquid investments that are readily convertible into known amounts of cash
(B) Demand deposits with banks.
(C) Investment, when it has a short maturity of, say, 3 months or less from the date of acquisition.
(D) All of the above
Answer:
(B) Demand deposits with banks.

Question 9.
Which of the following is/are cash flow from Operating Activities
(A) Cash receipts and cash payments of an insurance enterprise for premiums and claims, annuities and other policy benefits
(B) Cash receipts and payments relating to futures contracts, forward contracts, option contracts and swap contracts when the contracts are held for dealing or trading purposes
(C) Cash payments or refunds of income taxes unless they can be specifically identified with financing and investing activities and
(D) All of the above
Answer:
(D) All of the above

Question 10.
Which of the following is/are cash flow from Investing Activities
(A) Cash advances and loans made to third parties other than advances and loans made by a financial enterprise.
(B) Cash payments to acquire shares, warrants or debt instruments of other enterprises and interests in joint ventures
(C) Interest received on investment in debentures and bonds.
(D) All of the above
Answer:
(D) All of the above

Question 11.
Which of the following is / are cash flow from Financing Activities
(A) Cash proceeds from issuing debentures, loans, notes, bonds, and other short or long-term borrowings
(B) Cash receipts from disposal of intangibles.
(C) Cash receipts and payments relating to futures contracts, forward contracts, option contracts and swap contracts when the contracts are held for dealing or trading purposes.
(D) All of the above
Answer:
(A) Cash proceeds from issuing debentures, loans, notes, bonds, and other short or long-term borrowings

Question 12.
Under Direct Method of Cash Flow Statement, starting point is …………..
(A) Profit before working capital changes
(B) Funds from operation
(C) Cash receipt from customers
(D) Cash paid to suppliers & employees
Answer:
(C) Cash receipt from customers

Question 13.
In cash flow statement cash flow on account of income tax paid is shown:
(A) Under the heading “Cash flow from investing activities”
(B) Under the heading “Cash flow from financing activities”
(C) Under the heading “Cash flow from operating activities” before heading cash generated from operation
(D) Under the heading “Cash flow from operating activities” after the heading cash generated from operation
Answer:
(D) Under the heading “Cash flow from operating activities” after the heading cash generated from operation

Question 14.
Taxes on income should be classified as:
(A) Operating Activities
(B) Investing Activities
(C) Financing Activities
(D) Operating Activities, unless they can be specifically identified with financial and investing activities
Answer:
(D) Operating Activities, unless they can be specifically identified with financial and investing activities

Question 15.
While preparing cash flow statement as per Indirect Method which of the following is added in net profit before working capital changes to calculate cash flow from operating activities
(A) Increase in current assets
(B) Decrease in current liabilities
(C) Voluntary separation payments
(D) Decrease in current assets
Answer:
(D) Decrease in current assets

Question 16.
The Preparation of Cash flow statement is governed by AS-3 (Revised). This statement is
(A) Correct
(B) Not correct
(C) Partially correct
(D) None of the above
Answer:
(A) Correct

Question 17.
A cash flow statement is like an income statement
(A) I agree
(B) I disagree
(C) I cannot say
(D) This statement is ambiguous
Answer:
(B) I disagree

Question 18.
Funds flow statement and cash flow statement are one and the same
(A) True
(B) False
(C) I cannot say
(D) This statement is irrelevant
Answer:
(B) False

Question 19.
Increase in the amount of bills payable results in ………….
(A) Increase in cash
(B) Decrease in cash
(C) No change in cash
(D) Cannot say anything without monetary figures
Answer:
(A) Increase in cash

Question 20.
Cash from operations is equal to
(A) Net profit plus increase in outstanding expenses
(B) Net profit plus increase in debtors
(C) Net profit plus increase in stock
(D) None of the above
Answer:
(A) Net profit plus increase in outstanding expenses

Question 21.
Cash equivalents are short term highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value.
(A) I agree
(B) I disagree
(C) I cannot say
(D) This statement is ambiguous
Answer:
(A) I agree

Question 22.
For an investment to qualify as a cash equivalent, it must be readily convertible to a known amount of ……….
(A) Gold
(B) Cash
(C) Investment
(D) Real estate
Answer:
(B) Cash

Question 23.
Non-cash transactions
(A) Form part of cash flow statement
(B) Do not form part of cash flow statement
(C) May or may not form part of cash flow statement
(D) I cannot say whether they are part of cash flow statement
Answer:
(A) Form part of cash flow statement

Question 24.
Which of the following would be considered a cash-flow item from an “investing” activity
(A) Cash outflow from interest
(B) Cash outflow from dividend
(C) Cash outflow to acquire fixed assets
(D) All of the above
Answer:
(C) Cash outflow to acquire fixed assets

Question 25.
Which of the following is a cash flow from a “financing” activity
(A) Cash outflow to the government for taxes
(B) Cash outflow to shareholders as dividends.
(C) Cash outflow to purchase bonds issued by another company
(D) All of the above
Answer:
(B) Cash outflow to shareholders as dividends.

Question 26.
On an accounting statement of cash flows an “increase(decrease) in cash and cash equivalents” appears as …………..
(A) Cash flow from operating activities.
(B) Cash flow from investing activities.
(C) Cash flow from financing activities
(D) None of the above
Answer:
(D) None of the above

Question 27.
Which of the following is NOT a cash outflow for the firm
(A) Depreciation
(B) Dividends
(C) Interest payments
(D) Taxes
Answer:
(A) Depreciation

Question 28.
Which of the following involves a movement of cash
(A) A bonus issue
(B) A rights issue
(C) Depreciation of fixed assets
(D) Creation of a provision for pensions
Answer:
(B) A rights issue

Question 29.
Which one of the following events will increase the cash balances of a business
(A) Loan repayment to banks
(B) Debtors paying amounts owed
(C) Bank granting it an overdraft facility
(D) Sale of stock on credit
Answer:
(B) Debtors paying amounts owed

Question 30.
Which one of the following events will reduce the cash balances of a business
(A) Dividend proposed pending share-holder approval
(B) Purchase of stock on credit
(C) Creditors paid amounts owed
(D) Purchase of fixed assets on interest free credit
Answer:
(C) Creditors paid amounts owed

Question 31.
Which one of the following is false
(A) If cash outflows exceed cash inflows on an ongoing basis, the business will eventually run out of cash
(B) Rapidly expanding companies can sometimes face a cash shortage
(C) Cash is the lifeblood of a business and without it the business will die
(D) A profitable company will never run out of cash
Answer:
(D) A profitable company will never run out of cash

Question 32.
A business may incur an operating loss in a given financial year yet has more cash in the bank at the end. A reason for this could be that:
(A) Some fixed assets were sold for cash
(B) Dividends paid were higher this year than last
(C) Payments to creditors were made more promptly
(D) Debtors were allowed a longer period of credit
Answer:
(A) Some fixed assets were sold for cash

Question 33.
A company has a negative cash flow from operating activities. What could explain this negative cash flow
(A) The repayment of a loan
(B) A sudden increase in credit sales
(C) High levels of dividend payments
(D) A substantial investment in new fixed assets
Answer:
(B) A sudden increase in credit sales

Question 34.
AS – 3 (Cash Flow Statements) requires that cash receipts and payments should be analyzed into three categories. Under which category would you expect to find the cash proceeds from a share issue
(A) Financing Activities
(B) Investing Activities
(C) Operating Activities
(D) Redemption Activities
Answer:
(A) Financing Activities

Question 35.
In AS – 3 (Cash Flow Statements) where would you find a bank current account debit balance
(A) In cash and cash equivalents
(B) In investing activities
(C) In financing activities
(D) In operating activities
Answer:
(A) In cash and cash equivalents

Question 36.
All of the following are true regarding the cash flow statement except
(A) This statement explains the causes of the change in the cash balance
(B) Cash outflows are shown in parentheses to indicate that payments must be subtracted
(C) This statement reports information as of a certain date and therefore, is dated like the balance sheet
(D) This statement classifies cash transactions as operating, investing, or financing
Answer:
(C) This statement reports information as of a certain date and therefore, is dated like the balance sheet

Question 37.
All of the following are true regarding the purpose of the statement of cash flows except
(A) It is for predicting future cash flows
(B) It is for determining the company’s ability to pay dividends to shareholders and interest and principle to creditors
(C) It is for evaluating management decisions
(D) It is for reporting net income
Answer:
(D) It is for reporting net income

Question 38.
All of the following are true regarding the operating activity section of the cash flow statement except
(A) The direct or indirect format may be used to present the information
(B) The direct method includes the sale of assets reporting a gain or a loss
(C) A negative cash flow warrants investigation
(D) It includes cash transactions affecting (non-cash) current asset and current liability accounts
Answer:
(B) The direct method includes the sale of assets reporting a gain or a loss

Question 39.
Why is the statement of cash flows useful to the analyst
(A) It is the only source in financial statements for learning about cash generation.
(B) Focusing on net income can be misleading if a company has a healthy profit, but cannot translate the profit into cash.
(C) The statement of cash flows reveals why a company was able to generate a profit
(D) Both (A) and (B)
Answer:
(D) Both (A) and (B)

Question 40.
The following items would be classified as operating activities on the statement of cash flows:
(A) Acquisitions of equipment, payment of dividends, revenue.
(B) Proceeds from borrowing, payments of dividends, purchases of supplies
(C) Payments for inventory, payments for salaries, cash received from sale of goods
(D) Payments on loans, payments for taxes, payments for rent
Answer:
(C) Payments for inventory, payments for salaries, cash received from sale of goods

Question 41.
The following items would be classified as investing activities on the statement of cash flows:
(A) Proceeds from borrowing, payment of dividends, receipt of dividends
(B) Proceeds from borrowing, payment of dividends, receipt of dividends
(C) Sale of property, purchase of equity securities, loans to others
(D) Sale of goods, receipt of dividends, repurchase of firm’s own stock
Answer:
(C) Sale of property, purchase of equity securities, loans to others

Question 42.
The following items would be classified as financing activities on the statement of cash flows:
(A) Proceeds from borrowing, payment of dividends, repayment of debt.
(B) Payments for inventory, payments to lenders, payments for taxes.
(C) Sales of goods, repayment of debt, loans to others
(D) Loans to others, returns from loans to others, acquisition of land
Answer:
(A) Proceeds from borrowing, payment of dividends, repayment of debt.

Question 43.
What impact does depreciation have on the cash account
(A) Depreciation results in an decrease to cash.
(B) Depreciation has no impact on the cash account
(C) Depreciation only impacts the cash account if inflation has occurred.
(D) Depreciation results in an increase to cash
Answer:
(B) Depreciation has no impact on the cash account

Question 44.
If net cash provided or used by operating, financing and investing activities are added together, the result is:
(A) The change in cash
(B) Cash inflow
(C) Net income
(D) Cash out flow
Answer:
(A) The change in cash

Question 45.
Which of the following statement is true
(A) The payment of interest on a note payable is a cash flow from a financing activity.
(B) Collection of principal on a note receivable is a cash flow from financing activities.
(C) The difference between the indirect and direct methods of cash flow determination only affects the determination of investing activities cash flows.
(D) Cash flows associated with property, plant, and equipment acquisition and disposition are reported as cash flows from investing activities.
Answer:
(D) Cash flows associated with property, plant, and equipment acquisition and disposition are reported as cash flows from investing activities.

Question 46.
Which of the following statement is/ are false
(A) The statement of cash flows explains how the cash balance changed during a particular period of time.
(B) Under the indirect method, depreciation expense is added to net income, because it decreases net income but doesn’t consume a cash flow.
(C) Cash flows associated with issuance and retirement of long-term debt and equity are reported as cash flows from investing activities.
(D) Under the indirect method, an increase in prepaid expenses is deducted from net income.
Answer:
(C) Cash flows associated with issuance and retirement of long-term debt and equity are reported as cash flows from investing activities.

Question 47.
Which of the following transactions would not create a cash flow
(A) A company purchased some of its own shares from a shareholder.
(B) Amortization of a patent
(C) Payment of a cash dividend.
(D) Sale of equipment at book value.
Answer:
(B) Amortization of a patent

Question 48.
Which of the following would not be reported as an investing activity
(A) Selling a depreciable asset for cash at a loss.
(B) Purchasing patent using cash.
(C) Purchasing land in exchange for stock.
(D) Purchasing shares of stock of another company using cash.
Answer:
(C) Purchasing land in exchange for stock.

Question 49.
Which of the following statements for the statement of cash flows is correct
(A) A company with a net loss on the income statement will always have a net cash outflow from operating activities.
(B) A purchase of equipment is classi¬fied as a cash inflow from investing activities.
(C) Cash dividends received on stock investments are classified as cash flows from operating activities.
(D) Cash dividends paid are classified as cash flows from operating activities.
Answer:
(B) A purchase of equipment is classified as a cash inflow from investing activities.

Question 50.
Which of the following is reported as a cash flow from investing activities
(A) Cash received from dividends earned.
(B) Purchasing land in exchange for common stock.
(C) Selling a long-term investment at a loss for cash.
(D) Interest paid on long term loans.
Answer:
(C) Selling a long-term investment at a loss for cash.

Question 51.
Which statement regarding the indirect method is false
(A) Depreciation expense is added to net income.
(B) An increase in accounts receivable is added to net income.
(C) An increase in accounts payable is added to net income.
(D) An increase in inventory is subtracted from net income
Answer:
(B) An increase in accounts receivable is added to net income.

Question 52.
Which of the following transactions would be reported as a financing activity
(A) The cash received as interest on long term investment.
(B) Acquiring land by signing bills payable.
(C) Paying cash to shareholder for dividends.
(D) Purchasing shares of another company using cash.
Answer:
(C) Paying cash to shareholder for dividends.

Question 53.
Which of the following statement is/ Eire false
(A) As per AS-3 listed companies has to prepare Cash Flow Statement by Direct Method.
(B) Cash flows from financing activities include those cash flows with respect to issuing and retiring long-term debt and equity.
(C) Cash flows from financing activities include those cash flows with respect to paying previously declared dividends.
(D) All of the above
Answer:
(A) As per AS-3 listed companies has to prepare Cash Flow Statement by Direct Method.

Question 54.
Which of the following would be deducted from net income when determining cash flows from operating activities under the indirect method
(A) An decrease in accounts payable.
(B) Depreciation expense.
(C) A increase in prepaid insurance.
(D) A gain on the sale of a depreciable asset.
Answer:
(D) A gain on the sale of a depreciable asset.

Question 55.
Which of the following would be added to net income when determining cash flows from operating activities under the indirect method
(A) An increase in accounts payable.
(B) Patent amortization expense.
(C) A decrease in prepaid insurance.
(D) A gain on the sale of a depreciable asset.
Answer:
(B) Patent amortization expense.

Question 56.
Which of the following would be deducted from net income when determining cash flows from operating activities under the indirect method
(A) A decrease in bills payable
(B) Patent amortization expense
(C) A decrease in prepaid rent.
(D) A loss on the sale of a depreciable asset.
Answer:
(A) A decrease in bills payable

Question 57.
Which of the following transactions would increase the net cash flow from Operating Activities
(A) Issuance of capital stock for cash at a price above par.
(B) Purchase of truck by issuing a bills payable.
(C) Sale of equipment for cash at a gain.
(D) Collection of an account receivable from a customer.
Answer:
(D) Collection of an account receivable from a customer.

Question 58.
For purposes of preparing a cash flow statement, which of the following is not considered a “cash equivalent”
(A) A money market fund.
(B) An investment in bonds
(C) Treasury bills.
(D) Commercial paper.
Answer:
(B) An investment in bonds

Question 59.
An important distinction between the direct method and the indirect method of preparing a statement of cash flows is that:
(A) The direct method reconciles accrualbased net income with net cash flow from operations; the indirect method shows the specific cash inflows and outflows constituting the operating activities.
(B) The direct method results in a lower (more conservative) figure for net cash flow from operating activities than does the indirect method.
(C) The format of the section computing net cash flow from operating activities is different under the two methods.
(D) All of the above
Answer:
(C) The format of the section computing net cash flow from operating activities is different under the two methods.

Question 60.
Which of the following statement is true
(A) When a company purchases equipment issuing shares, the equipment purchase is reported as a financing activity.
(B) When a company sells equipment for cash at a loss, cash flows from investing activities decreases.
(C) Collection of principal on a bills receivable is a cash flow from financing activities.
(D) None of the above
Answer:
(D) None of the above

Question 61.
In a statement of cash flows, the acquisition of land by issuing equity or preference shares:
(A) Is not shown at all, since no cash was received or disbursed.
(B) Is shown as an investing activity.
(C) Is shown as a financing activity
(D) Is shown in a supplementary schedule as a non-cash investing and financing transaction
Answer:
(D) Is shown in a supplementary schedule as a non-cash investing and financing transaction

Question 62.
Which of the following characteristics does not apply to cash equivalents
(A) Short-term
(B) Highly-liquid
(C) Readily convertible into cash
(D) Highly sensitive to interest rate changes
Answer:
(D) Highly sensitive to interest rate changes

Question 63.
Which of the following would not be an adjustment to net income using the indirect method
(A) Amortization expense
(B) An increase in prepaid insurance
(C) An increase in inventories
(D) An increase in land
Answer:
(D) An increase in land

Question 64.
Which one of the following is NOT a category of cash flows required to be shown on the statement of cash flows
(A) Cash flows from operating activities
(B) Cash flows from financing activities
(C) Cash flows from taxation
(D) Cash flows from investing activities
Answer:
(C) Cash flows from taxation

Question 65.
If a company changes from offering 30 days’ credit to customers to offering 50 days credit, which of the following statements is correct
(A) Cash generated from operations will increase.
(B) Cash generated from financing activities will decrease.
(C) Cash generated from operations will decrease.
(D) There will be no effect on the statement of cash flows.
Answer:
(C) Cash generated from operations will decrease.

Question 66.
Which of the following would NOT be revealed by a company’s statement of cash flows
(A) Whether the company has paid a dividend during the year
(B) How the company has managed its working capital over the last financial year
(C) Whether the company has exceeded its overdraft limit during the year
(D) Whether the company has raised extra long-term funding during the year
Answer:
(C) Whether the company has exceeded its overdraft limit during the year

Question 67.
Which of the following activities can increase cashflow from investing activities
(A) Purchasing production equipment with cash.
(B) Selling products and receiving cash.
(C) Paying out cash dividends.
(D) Selling an office building and receiving cash.
Answer:
(D) Selling an office building and receiving cash.

Question 68.
Cash flows directly related to the
production and sale of the firm’s products and services are called:
(A) Investing cash flows
(B) Financing cash flows
(C) Operating cash flows
(D) None of the above
Answer:
(C) Operating cash flows

Question 69.
Cash flows that result from debt and equity financing transactions, including incurrence and repayment of debt, cash inflows from the sale of shares, and cash outflows to pay cash dividends or repurchase shares are called:
(A) Investing cash flows
(B) Operating cash flows
(C) Financing cash flows
(D) None of the above
Answer:
(C) Financing cash flows

Question 70.
Holding all other things constant, which of the following represents a cash outflow
(A) The company sells a machine.
(B) The company acquires inventory.
(C) The company receives a bank loan.
(D) The company increases accounts payable.
Answer:
(B) The company acquires inventory.

Question 71.
If you are looking to review a firm’s sources and uses of cash flows over the year, the easiest place to find that information is
(A) The Income Statement
(B) The Statement of Retained Earnings
(C) The Statement of Cash Flows
(D) The Balance Sheet
Answer:
(C) The Statement of Cash Flows

Question 72.
In order to identify the amount of funds that a firm borrowed during the preceding year, what section is the best source within the Statement of Cash Flows
(A) Operating Flows
(B) Investment Flows
(C) Financing Flows
(D) Total Net Cash Flows
Answer:
(C) Financing Flows

Question 73.
If you start with earnings before interest and taxes and then subtract a firm’s tax expense while adding back the amount of depreciation expense for the firm during the year, the resulting figure is called
(A) Free Cash Flow
(B) Operating Cash Flow
(C) Net Cash Flow
(D) Gross Cash Flow
Answer:
(B) Operating Cash Flow

Question 74.
In a statement of cash flows, interest payments to lenders and other creditors should be classified as a(«):
(A) Operating Activity
(B) Borrowing Activity
(C) Lending Activity
(D) Financing Activity
Answer:
(D) Financing Activity

Question 75.
An increase in inventories of ₹ 5,000 over the course of a year would be shown on the company’s statement of cash flows prepared under the indirect method as:
(A) An addition to net income of ₹ 5,000 in order to arrive at net cash provided by operating activities.
(B) A deduction from net income of ₹ 5,000 in order to arrive at net cash provided by operating activities.
(C) An addition of ₹ 5,000 under investing activities.
(D) A deduction of ₹ 5,000 under investing activities.
Answer:
(B) A deduction from net income of ₹ 5,000 in order to arrive at net cash provided by operating activities.

Question 76.
Principle revenue generating activities are called as ………….
(A) Financing Activities
(B) Investing Activities
(C) Operating Activities
(D) None of the above
Answer:
(C) Operating Activities

Question 77.
Unrealized gains & losses from foreign exchange rates are ………
(A) Not cash flows
(B) Cash flows from operating activities
(C) Cash flows from investing activities
(D) Cash flows from financing activities
Answer:
(A) Not cash flows

Question 78.
The statement of cash flows is:
(A) Another name for the statement of financial position.
(B) A financial statement that reports the cash inflows and cash outflows for an accounting period, and that classifies those cash flows as operating activities, investing activities, or financing activities.
(C) A financial statement that lists the types and amounts of assets, liabilities, and equity of a business on a specific date.
(D) A financial statement that lists the types and amounts of the revenues and expenses of a business for an accounting period.
Answer:
(B) A financial statement that reports the cash inflows and cash outflows for an accounting period, and that classifies those cash flows as

Question 79.
Cash flows arising from interest and dividends received in the case of a financial enterprise should be classified as cash flows arising from
(A) Investing Activities
(B) Financing Activities
(C) Operating Activities
(D) Extraordinary Activities
Answer:
(C) Operating Activities

Question 80.
Preference shares of a company acquired shortly before their specified redemption date
(A) Will be shown in investing activities
(B) Will be shown in financing activities
(C) Will be shown in operating activities
(D) Will be shown as cash & cash equivalents
Answer:
(D) Will be shown as cash & cash equivalents

Question 81.
When the instalment paid in respect of a fixed asset acquired on deferred payment basis includes both interest and loan, the interest element is classified under activities and the loan element is classified under activities.
(A) Financing, Investing
(B) Investing, Operating
(C) Operating, Financing
(D) Investing, Operating
Answer:
(A) Financing, Investing

Question 82.
Cash flows from operating activities are:
(A) Primarily derived from the principal revenue-producing activities of the enterprise
(B) Generally result from the transactions and other events that enter into the determination of net profit or loss.
(C) Both (A) & (B)
(D) Either (A) or (B)
Answer:
(C) Both (A) & (B)

Question 83.
Cash flows arising from the purchase and sale of dealing or trading securities are classified as ………..
(A) Operating Activities
(B) Investing activities
(C) Financing activities
(D) Extraordinary activities
Answer:
(A) Operating Activities

Question 84.
Cash advances and loans made by financial enterprises are usually classified
(A) Operating Activities
(B) Investing activities
(C) Financing activities
(D) Extraordinary activities
Answer:
(A) Operating Activities

Question 85.
Cash flows arising from transactions in a foreign currency should be recorded in an enterprise’s reporting currency by applying to the foreign currency amount the exchange rate
(A) Prevailing at the beginning of the financial year.
(B) At average rate
(C) Prevailing at the end of the financial year.
(D) Between the reporting currency and the foreign currency at the date of the cash flow.
Answer:
(D) Between the reporting currency and the foreign currency at the date of the cash flow.

Question 86.
Income statement of Z Ltd. for the year ended was as follows:
Cash Flow Statement – Corporate and Management Accounting MCQ 1
Net profit before working capital changes = ?
(A) ₹ 1,15,200
(B) ₹ 8,64,000
(C) ₹ 4,80,000
(D) ₹ 3,52,000
Answer:
(D) ₹ 3,52,000

While calculating “Net profit before working capital changes” through shortcut method following logic is applied.
Cost of goods sold and operating expenses incurred in cash have to be deducted from sales. If income statement starts from gross profit then only operating expenses incurred in cash has to deducted.

Alternatively, If you start from net profit then add the following items to get funds from operation:

  • Non-operating expenses
  • Non-cash items like depreciation or goodwill written off
  • Financial expense like interest.

Deduct following items:
Non-operating income like profit on sale of assets or investment.
40,32,000 – 31,68,000 – 3,84,000 – 1,28,000 = 3,52,000

Question 87.
Net profit before working capital changes of N Ltd. is ₹ 3,52,000. Changes in working capital during the year is as follows:
Cash Flow Statement – Corporate and Management Accounting MCQ 2
Cash generated from operation = ?
(A) ₹ 5,61,280
(B) ₹ 6,18,880
(C) ₹ 1,47,720
(D) ₹ 5,61,280
Answer:
(B) ₹ 6,18,880
Cash Flow Statement – Corporate and Management Accounting MCQ 24Cash Flow Statement – Corporate and Management Accounting MCQ 25

Question 88.
Extracts of cash flow statement prepared by Z Ltd. are as follows:
Cash generated from operation is ₹ 5,41,000.
Income tax paid ₹ 1,80,000.
Sale of fixed assets ₹ 50,000.
Voluntary separation payment paid ₹ 80,000 and
Law compensation suit received is ₹ 1,25,000.
Cash flow from operating activities = ₹
(A) ₹ 4,06,000
(B) ₹ 3,56,000
(C) ₹ 5,36,000
(D) ₹ 4,16,000
Answer:
(A) ₹ 4,06,000
5,41,000 – 1,80,000 – 80,000 + 1,25,000 = 4,06,000. Sale of fixed assets ₹ 50,000 is not taken in calculation because it will come under the heading “Cash flow from investing activities”.

Question 89.
Accounts of S Ltd. shows that balance of cash and cash equivalents has been increase by ₹ 19,200 as compared to last year. If cash flow statement revels net cash inflow from financing activities is ₹ 19,200 and cash outflow from investing activities is ₹ 4,80,000.
Cash from operating activities = ₹
(A) ₹ 5,18,400
(B) ₹ 4,99,200
(C) ₹ 4,60,800
(D) ₹ 4,80,000
Answer:
(D) ₹ 4,80,000
Cash Flow Statement – Corporate and Management Accounting MCQ 26

Question 90.
From the following details calculate the cash flow from operating activities.
Cash Flow Statement – Corporate and Management Accounting MCQ 3
Net profit before working capital changes is  5,39,000. Cash flow from operation ?
(A) ₹ 5,41,000
(B) ₹ 3,61,000
(C) ₹ 3,41,000
(D) ₹ 3,99,000
Answer:
(B) ₹ 3,61,000
Cash Flow Statement – Corporate and Management Accounting MCQ 27

Question 91.
From the following details calculate the cash generated from operations.
Net profit before working capital changes is ₹ 3,051 lakhs. Net increase in current assets was ₹ 3,205 lakhs, while there is net increase in current liabilities by ₹ 9 lakhs.
(A) + ₹ 6,247 lakhs
(B) -₹ 145 lakhs
(C) + ₹ 6,256 lakhs
(D) – ₹ 6,265 lakhs
Answer:
(B) -₹ 145 lakhs
Cash Flow Statement – Corporate and Management Accounting MCQ 28

Question 92.
Cash flow statement of BB Ltd. shows the following position:
Cash inflows from operating activities ₹ 4,06,000, Cash outflow from investing activities ₹ 3,18,000 and Cash outflows from financing activities ₹ 18,000. Cash & cash equivalent at the end was ₹ 1,35,000.
Cash & cash equivalent at the beginning=?
(A) ₹ 6,07,000
(B) ₹ 29,000
(C) ₹ 5,71,000
(D) ₹ 65,000
Answer:
(D) ₹ 65,000
Cash Flow Statement – Corporate and Management Accounting MCQ 29

Question 93.
If opening balance of accounts receivable is ₹ 2,68,800; closing balance is ₹ 2,97,600 and toted credit sales during the year was ₹ 40,32,000. What is the cash received from debtors under the direct method of cash flow statement
(A) ₹ 40,60,800
(B) ₹ 45,98,400
(C) ₹40,03,200
(D) ₹ 43,00,800
Answer:
(C) ₹40,03,200
Cash Flow Statement – Corporate and Management Accounting MCQ 30

Question 94.
From the following details calculate the cash paid to suppliers and employees as per direct method of cash flow statement.
Cash Flow Statement – Corporate and Management Accounting MCQ 4
Cash Flow Statement – Corporate and Management Accounting MCQ 5
(A) ₹ 32,56,320
(B) ₹ 37,70,800
(C) ₹ 33,84,320
(D) ₹ 36,42,880
Answer:
(C) ₹ 33,84,320
Cash Flow Statement – Corporate and Management Accounting MCQ 31

Question 95.
From the following details find out the cash & cash equivalent at the end.
Cash Flow Statement – Corporate and Management Accounting MCQ 6
(A) ₹65,000
(B) ₹ 1,15,000
(C) ₹ 35,000
(D) ₹ 1,40,000
Answer:
(A) ₹65,000
90,000 – 2,00,000 – 3,50,000 – 1,00,000 – 45,000 + 15,000 + 3,53,000 – 1,10,000 + 1,50,000 – 60,000 + 1,00,000 – 18,000 + 90,000 + 50,000 + 1,00,000 = 65,000

Question 96.
From the following details find out the cash & cash equivalents at the end.
Cash Flow Statement – Corporate and Management Accounting MCQ 7
Cash Flow Statement – Corporate and Management Accounting MCQ 8
At the end of the year it was noted that there is foreign exchange loss of ₹ 1.600 in value of short-term investment.
(A) 11,64,000
(B) ₹ 1,62,400
(C) ₹ 1,65,600
(D) 14,06,600
Answer:
(C) ₹ 1,65,600
84,000 + 20,000 + 60,000 + 1,600 = 1,65,600.
In case of foreign exchange loss there are two effects while solving the problem on cash flow statement. First effect will be debit to profit & loss adjustment account and second effect is to add to cash & cash equivalents at the end.

Question 97.
A Ltd. paid income tax on capital gains ₹ 2,16,300 resulting from disposal of fixed assets. It should be shown in:
(A) Operating Activities
(B) Investing Activities
(C) Financing Activities
(D) By way of adjustment in cash & cash equivalents at the end.
Answer:
(B) Investing Activities
Since disposal of fixed asset is classified under investing activity; capital gain tax paid will also come under investing activity.

Question 98.
N Ltd. purchased machinery form Australia for A$ 50,000 on 1.10.2015. It entered into currency option contract for purchase of foreign exchange to pay for machinery and paid premium ₹ 25,000. How will you classify such premium in the cash flow statement of N Ltd.?
(A) Operating Activities
(B) Investing Activities
(C) Financing Activities
(D) Extraordinary Activities
Use the following information to answer next 5 questions on the basis of direct method of cash flow statement.-
Following is the summary of cash transactions extracted from the books of Zigzag Ltd.:
Cash Flow Statement – Corporate and Management Accounting MCQ 9
Cash Flow Statement – Corporate and Management Accounting MCQ 10
Answer:
(B) Investing Activities
Since purchase of fixed asset is classified under investing activity; premium paid for entering currency option contract will also come under investing activity.

Question 99.
Cash paid to suppliers & employees =₹
(A) ₹ 4,094 thousand
(B) ₹ 4,462 thousand
(C) ₹ 5,566 thousand
(D) ₹ 1,104 thousand
Answer:
(B) ₹ 4,462 thousand
Cash Flow Statement – Corporate and Management Accounting MCQ 32
Cash Flow Statement – Corporate and Management Accounting MCQ 33

Question 100.
Cash generated from operations = ₹
(A) ₹ 4,094 thousand
(B) ₹ 4,462 thousand
(C) ₹ 5,566 thousand
(D) ₹ 1,104 thousand
Answer:
(D) ₹ 1,104 thousand
Cash Flow Statement – Corporate and Management Accounting MCQ 32
Cash Flow Statement – Corporate and Management Accounting MCQ 33

Question 101.
Cash flows from operating activities = ₹
(A) ₹ 618 thousand
(B) ₹ 1,104 thousand
(C) ₹ 424 thousand
(D) ₹ 562 thousand
Answer:
(A) ₹ 618 thousand
Cash Flow Statement – Corporate and Management Accounting MCQ 32
Cash Flow Statement – Corporate and Management Accounting MCQ 33

Question 102.
Cash flows from investing activities = ₹
(A) ₹ (460) thousand
(B) ₹ 256 thousand
(C) ₹ (60) thousand
(D) ₹ (204) thousand
Answer:
(D) ₹ (204) thousand
Cash Flow Statement – Corporate and Management Accounting MCQ 32
Cash Flow Statement – Corporate and Management Accounting MCQ 33

Question 103.
Cash flows from financing activities = ₹
(A) ₹ (460) thousand
(B) ₹ 256 thousand
(C) ₹ (60) thousand
(D) ₹ (204) thousand
Answer:
(C) ₹ (60) thousand
Cash Flow Statement – Corporate and Management Accounting MCQ 32
Cash Flow Statement – Corporate and Management Accounting MCQ 33

Question 104.
Income statement of N Ltd. for the year ended was as follows:
Cash Flow Statement – Corporate and Management Accounting MCQ 11
Net profit before working capital changes
(A) ₹ 91,050
(B) ₹ 1,09,050
(C) ₹ 97,450
(D) ₹ 99,300
Answer:
(B) ₹ 1,09,050
Cash Flow Statement – Corporate and Management Accounting MCQ 34

Question 105.
Income statement of S Ltd. for the year ended was as follows:
Cash Flow Statement – Corporate and Management Accounting MCQ 12
Net profit before working capital changes = ₹
(A) ₹ 3,696
(B) ₹ 3,051
(C) ₹ 3,942
(D) ₹ 4,317
Answer:
(B) ₹ 3,051
20,301 – 15,984 – 375 – 891 = 3,051

Question 106.
Indian Info Line, a stock brokering firm, received ₹ 1,50,000 as premium for forward contract entered for purchase of equity shares. How will you classify this amount in the cash flow statement of the firm
(A) Operating Activities
(B) Investing Activities
(C) Financing Activities
(D) Extraordinary Activities
Answer:
(A) Operating Activities
Cash flow from principal revenue-producing activities of the enterprise has to be classified as “Cash flow from operating activities”. Hence if stock brokering firm receives premium for forward contract; it will come under “Cash flow from operating activities”.

Question 107.
Income statement of Z Ltd. for the year ended was as follows:
Cash Flow Statement – Corporate and Management Accounting MCQ 13
Net profit before working capital changes = ₹
(A) ₹ 5,98,500
(B) ₹ 5,43,500
(C) ₹ 9,16,000
(D) ₹ 5,41,500
Answer:
(B) ₹ 5,43,500
46,37,200 – 37,21,200 – 3,17,500 = 5,98,500

Question 108.
Income statement of Z Ltd. for the year ended was as follows:
Cash Flow Statement – Corporate and Management Accounting MCQ 14
Increase in current assets ₹ 1,13,800
Increase in current liability ₹ 24,800,
Cash flows from operating activities = ₹
(A) ₹ 8,40,500
(B) ₹ 4,24,500
(C) ₹ 4,79,500
(D) ₹ 5,34,500
Answer:
(C) ₹ 4,79,500
Cash Flow Statement – Corporate and Management Accounting MCQ 35
Cash Flow Statement – Corporate and Management Accounting MCQ 36

Question 109.
Use the following information to calculate net cash from operating activities: cash sales ₹ 1,00,000; cash from account receivable ₹ 2,00,000; cash dividends received ₹ 3,000; dividends paid ₹ 4,000; rent paid ₹ 5,000; and amortization expense ₹ 6,000.
(A) ₹ 2,98,000
(B) ₹ 2,94,000
(C) ₹ 98,000
(D) ₹ 2,92,000
Answer:
(B) ₹ 2,94,000
1,00,000 + 2,00,000 + 3,000- 4,000 – 5,000 = 2,94,000

Question 110.
Use following information to calculate net cash from investing activities:
Sell of capital asset for ₹ 10,000 cash and a ₹ 1,000 gain; purchase a bond investment for f 16,000; receive ₹ 2,000 interest payment from the bond investment; and pay off a ₹ 3,000 mortgage payable.
(A) ₹ 5,000 net cash outflow from investing activities
(B) ₹ 4,000 net cash outflow from investing activities
(C) ₹ 6,000 net cash outflow from investing activities
(D) ₹ 9,000 net cash outflow from investing activities
Answer:
(B) ₹ 4,000 net cash outflow from investing activities
10,000 – 16,000 + 2,000 = – 4,000.
Sell price of 10,000 includes gain hence not required to separately added.
Mortgage payable comes under financing activities.

Question 111.
Use following information to calculate net cash from financing activities:
Issue of shares ₹ 2,00,000; repurchase a company’s own shares ₹ 20,000; pay mortgage payable principal ₹ 1,00,000; pay mortgage payable interest ₹ 10,000; a stock dividend is declared and distributed that reduces retained earnings by ₹ 30,000; and a cash dividend is declared and paid that reduces retained earnings by ₹ 40,000.
(A) ₹ 40,000 net cash inflow from financing activities
(B) ₹ 10,000 net cash inflow from financing activities
(C) ₹ 30,000 net cash inflow from financing activities
(D) ₹ 60,000 net cash inflow from financing activities
Answer:
(C) ₹ 30,000 net cash inflow from financing activities
2,00,000-20,000- 1,00,000 – 10,000- 40,000 = 30,000.
Stock dividend means bonus issue, which do not involve any cash flow.

Question 112.
The balance sheet reported a beginning balance of ₹ 20,000 in Accounts Receivable and an ending balance of ₹ 15,000. The income statement reported Sales Revenue of ₹ 2,00,000. Using this information, compute cash collected from customers.
(A) ₹ 1,95,000
(B) ₹ 2,05,000
(C) ₹ 2,00,000
(D) ₹ 2,15,000
Answer:
(B) ₹ 2,05,000
2,00,000 + 20,000- 15,000 = 2,05,000

Question 113.
The balance sheet reported a beginning balance of ₹ 2,00,000 for the book value of equipment and an ending balance of ₹ 1,60,000. The income statement reported amortization expense of ₹ 20,000 and gain on the sale of equipment of ₹ 10,000. The cash flow statement reported acquisitions of capital assets totalling ₹ 30,000. Using this information, compute cash received from the sale of equipment.
(A) ₹ 40,000
(B) ₹ 20,000
(C) ₹ 50,000
(D) ₹ 60,000
Answer:
(D) ₹ 60,000
Cash Flow Statement – Corporate and Management Accounting MCQ 37

Question 114.
N Ltd. provides following information:
Cash Flow Statement – Corporate and Management Accounting MCQ 15
(A) ₹ 89,000
(B) ₹ 1,15,000
(C) ₹ 1,25,000
(D) ₹ 1,11,000
Answer:
(D) ₹ 1,11,000
Cash Flow Statement – Corporate and Management Accounting MCQ 38

Question 115.
S Ltd. provides following information:
Cash Flow Statement – Corporate and Management Accounting MCQ 16
(A) ₹ 2,59,000
(B) ₹ 3,27,000
(C) ₹ 3,47,000
(D) ₹ 3,81,000
Answer:
(D) ₹ 3,81,000
Cash Flow Statement – Corporate and Management Accounting MCQ 39

Question 116.
NSZ Ltd. paid an interim dividend of ₹ 1,00,000 along with ₹ 10,200 as corporate dividend tax. How will you classify this in the cash flow statement of the NSZ Ltd.?
(A) ₹ 1,00,000 as outflow in financing activities and ₹ 10,200 as outflow in operating activities.
(B) ₹ 1,10,200 as outflow in investing activities
(C) ₹ 1,00,000 as outflow in investing activities and ₹ 10,200 as outflow in operating activities.
(D) ₹ 1,10,200 as outflow in financing activities.
Answer:
(D) ₹ 1,10,200 as outflow in financing activities.

Question 117.
Z Ltd. income statement reported total revenues, ₹ 8,50,000 and total expenses ₹ 7,20,000 including ₹ 40,000 as depreciation. The balance sheet reported the following:
Accounts receivable – opening balance, ₹ 50,000 and ending balance, ₹ 40,000; Accounts payable – opening balance, ₹ 22,000 and ending balance, ₹ 28,000. Therefore, based only on this information, how much was the net cash inflow from operating activities
(A) ₹ 1,26,000
(B) ₹ 1,66,000
(C) ₹ 1,74,000
(D) ₹ 1,86,000
Answer:
(D) ₹ 1,86,000

Question 118.
LK Ltd. issued ₹ 50,000 of bonds, paid cash dividends of ₹ 8,000, sold long-term investments for ₹ 12,000, received ₹ 5,000 of dividend revenue, purchased treasury stock for ₹ 15,000, and purchased new equipment for f 19,000. What is the net cash flow from financing activities
(A) ₹ 70,000 inflow
(B) ₹ 27,000 inflow
(C) ₹ 80,000 inflow
(D) ₹ 42,000 inflow
Answer:
(D) ₹ 42,000 inflow

Question 119.
Reliance Capital, a financial service company, made a loan of ₹ 1 crore during the financial year 2015-16; it will be classified as
(A) Operating Activities
(B) Investing Activities
(C) Financing Activities
(D) Extraordinary Activities
Answer:
(A) Operating Activities

Question 120.
P Ltd. reported a net loss of ₹ 10,000 for the year ended 31.12.2007. During the year, accounts receivable decreased ₹ 5,000, inventory increased ₹ 8,000, accounts payable increased by ₹ 10,000, and amortization expense of ₹ 5,000 was recorded. During 2007, operating activities
(A) Used net cash of ₹ 2,000
(B) Used net cash of ₹ 8,000
(C) Provided net cash of ₹ 2,000
(D) Provided net cash of ₹ 8,000
Answer:
(C) Provided net cash of ₹ 2,000

Question 121.
S Ltd. had an increase in inventory of ₹ 40,000. The cost of goods sold was ₹ 90,000. There was a ₹ 5,000 decrease in accounts payable from the prior period. What were S Ltd. cash payments to suppliers
(A) ₹ 1,35,000
(B) ₹ 85,000
(C) ₹ 1,25,000
(D) ₹ 95,000
Answer:
(A) ₹ 1,35,000

Question 122.
If a company issues 1 million ₹ 1 shares at ₹ 1.30 per share, what will be the effect on the statement of cash flows
(A) Cash flows from financing activities will increase by ₹ 1.3 million.
(B) Cash flows from investing activities will increase by ₹ 1.3 million.
(C) Cash flows from investing activities will increase by ₹ 1.0 million.
(D) Cash flows from financing activities will increase by ₹ 1.0 million.
Answer:
(A) Cash flows from financing activities will increase by ₹ 1.3 million.

Question 123.
P Ltd. prepares its statement of cash flows using the indirect method. Its unamortized bond discount account decreased by ₹ 25,000 during the year. How should P Ltd. report the change in unamortized bond discount in its statement of cash flows
(A) As a financing cash inflow
(B) As a financing cash outflow
(C) As an addition to net income in the operating activities section
(D) As a subtraction from net income in the operating activities section
Answer:
(C) As an addition to net income in the operating activities section

Question 124.
In a given year a company decreased its inventory by ₹ 2,50,000, purchased ₹ 3,50,000 worth of fixed assets and took on a new ₹ 5,00,000 loan. What is the net change of the company’s cash as a result of these transactions
(A) -1,00,000
(B) + 1,00,000
(C) – 4,00,000
(D) +4,00,000
Answer:
(D) +4,00,000

Question 125.
State Bank of India, received a gross ₹ 1,500 Crores demand deposits from the customers and customers withdrawn ₹ 1,300 Crores of demand deposit during the financial year 2015-16. How will you classify this amount in the cash flow statement of the firm
(A) Operating activities ₹ 1,500 Crores as inflow, financing activities ₹ 1,300 as outflow.
(B) Investing activities ₹ 1,500 Crores as inflow, financing activities ₹ 1,300 as outflow.
(C) Financing Activities, on net basis₹ 200 Crores as inflow
(D) Operating Activities, on net basis ₹ 200 Crores as inflow
Answer:
(D) Operating Activities, on net basis ₹ 200 Crores as inflow

Question 126.
NS Ltd. had EBIT of ₹ 5,00,000 and had a depreciation expense of ₹ 2,00,000 this last year. If the firm was subject to an average tax rate of 30%, what was NS Ltd. operating cash flow for the year ₹ If you need to, assume that interest expense was zero.
(A) 3,05,000
(B) 3,50,000
(C) 4,50,000
(D) 5,50,000
Answer:
(D) 5,50,000

Question 127.
E & Co. had operating cash flow equal to ₹ 850 for 2014. If its earnings before interest and taxes was ₹ 1,000 while its tax bill was ₹300, what was E & Co. depreciation expense for the year.
(A) 150
(B) 550
(C) 1,550
(D) Not enough information to calculate
Answer:
(A) 150

Question 128.
Discount and Finance House of India (DFHI) purchased Commercial Paper (CP) of ₹ 100 Crores on 28.2.2015 for 89 days maturity. This is ready market for sale/ purchase of commercial paper. While preparing cash flow for the financial year ended 31.3.2015, DHFI should show CP of ₹ 100 Crores
(A) In investing activities.
(B) In financing activities.
(C) As cash equivalents.
(D) As a footnote to cash flow statement being contingent liability.
Answer:
(C) As cash equivalents.

Question 129.
Dec 2014: In cash flow statement, interest received by company is classified as —
(A) Operating activities
(B) Cash and cash equivalents
(C) Investing activities
(D) Financing activities
Answer:
(C) Investing activities

Question 130.
Dec 2014: In cash flow statement, dividend paid in case of financing company is classified as —
(A) Operating activities
(B) Investing activities
(C) Financing activities
(D) Cash and cash equivalents
Answer:
(A) Operating activities

Question 131.
Dec 2014: From the following data,find the value of building sold during the year:
Cash Flow Statement – Corporate and Management Accounting MCQ 17
A piece of land has been sold during the year and the profit on sale has been credited to capital reserve. Depreciation charged on building during the year is ₹ 5,000; no additions have been made under this head during the year.
(A) ₹ 30,000
(B) ₹ 50,000
(C) ₹ 40,000
(D) 145,000
Answer:
(D) 145,000
Cash Flow Statement – Corporate and Management Accounting MCQ 40

Question 132.
June 2015:
The following information pertains to Expert Ltd.:
Cash Flow Statement – Corporate and Management Accounting MCQ 18
Net profit before working capital changes is ₹ 5,56,000. The cash flow from operating activities will be —
(A) 4,26,800
(B) 5,76,800
(C) 5,35,200
(D) 4,16,800
Answer:
(A) 4,26,800
Cash Flow Statement – Corporate and Management Accounting MCQ 41

Question 133.
June 2015: In case of a financial enterprise, interest received on debentures held as investment is –
(A) Financing activity
(B) Investing activity
(C) Operating activity
(D) None of the above
Answer:
(C) Operating activity

Question 134.
June 2015: As per Accounting Standard-3, cash equivalents include –
(A) Treasury bills
(B) Commercial papers
(C) Money market funds
(D) All of the above
Answer:
(D) All of the above

Question 135.
June 2015: Cash payments to and on behalf of employees is an example of cash flow from –
(A) Operating activity
(B) Investing activity
(C) Financing activity
(D) None of the above
Answer:
(A) Operating activity

Question 136.
June 2015: Net profit before working capital changes of Super Ltd. is ₹ 4,35,000. Changes in working capital during the year Cash generated from operation for Super Ltd. will be -……..
Particulars — ₹
Decrease in stock — 2,58,000
Decrease in bills payable — 8,400
Increase in bills receivable — 38,800
Increase in prepaid expenses — 2,500
Increase in outstanding expenses — 7,800
Cash Genarated from operating system Ltd. will be……….
(A) ₹ 2,18,900
(B) ₹ 7,45,500
(C) ₹ 6,51,100
(D) ₹ 2,34,500
Answer:
(C) ₹ 6,51,100
Cash Flow Statement – Corporate and Management Accounting MCQ 42

Question 137.
June 2015: In an organization, provision for taxation as on 31 st December, 2013 was ₹ 16,000 and on 31st December, 2014 ₹ 18,000. Provision for taxation of ₹ 19,000 was made during the year 2014. The tax paid during the year is—
(A) ₹ 17,000
(B) ₹ 19,000
(C) ₹ 2,000
(D) ₹ 16,000
Answer:
(A) ₹ 17,000
Cash Flow Statement – Corporate and Management Accounting MCQ 43

Question 138.
Dec 2015: Match the following :
List-I — List-II
P. Cash flow statements — 1. Inflow of funds
Q. Inflow of cash — 2. Short-term financial planing
R. Investment (maturity period 3 months) — 3. Financing activity
S. Payment of dividend — 4. Cash equivalent
Select the correct answer from the options given below
Cash Flow Statement – Corporate and Management Accounting MCQ 19
Answer:
(A)

Question 139.
Dec 2015:
Statement-I:
In funds flow analysis, current assets and current liabilities are shown separately in a statement of changes in working capital.
Statement-II:
In cash flow analysis, increases and decreases of all current accounts are adjusted in the calculation of cash flow from operating activities.
Select the correct answer from the following
(A) Both statements are correct
(B) Both statements are incorrect
(C) Statement-I is correct, but Statement-II is incorrect
(D) Statement-I is incorrect, but Statement-II is correct
Answer:
(A) Both statements are correct

Question 140.
Dec 2015: Match the following:
List-I — List-II
P. Cost accounting — 1. Change in working capital
Q. Funds flow statement — 2. Deals with the cost of production, selling & distribution
R. Cash flow statement — 3. Is an important technique of financial analysis
S. Ratio analysis — 4. Cash & cash equivalents
Cash Flow Statement – Corporate and Management Accounting MCQ 20
Answer:
(A)

Question 141.
Dec 2015:
Assertion (A):
Cash flow statement enhances the comparability of report.
Reason (R):
Cash flow statement eliminates the effect of using different treatments for same transactions.
Select the correct answer from the following —
(A) Both A and R are true and R is the correct explanation of A
(B) Both A and R are true, but R is not the correct explanation of A
(C) A is true, but R is false
(D) A is false, but R is true
Answer:
(A) Both A and R are true and R is the correct explanation of A

Question 142.
Dec 2015: Arrange the following categories of cash inflows and cash outflows in the correct order of cash flow statements:
(1) Cash flows from investing activities
(2) Cash flows from financing activities
(3) Cash flows from operating activities.
Select the correct answer from the options given below —
(A) (3), (1), (2)
(B) (1), (3), (2)
(C) (3), (2), (1)
(D) (2), (1), (3)
Answer:
(A) (3), (1), (2)

Question 143.
Dec 2015:
Statement-1:
According to AS-3, provision for taxation should always be treated as a non-operating charge on profits.
Statement-II:
Dividend on shares is an appropriation of profits and not a trading charge.
Select the correct answer from the following
(A) Both statements are correct
(B) Both statements are incorrect
(C) Statement-I is correct, but Statement-II is incorrect
(D) Statement-I is incorrect, but Statement-II is correct
Answer:
(A) Both statements are correct

Statement I is correct because provisions for taX’ is non-cash item and always added to net profit to calculate ‘net profit before working capital changes’. In Cash Flow Statement ‘tax actually paid’ is deducted to arrive at ‘net cash flow
from operating activities’.

Statement II is also correct because dividend is paid on equity share capital or preference share capital i.e. to the shareholders who are owners of the enterprises and hence it is appropriation of profit and not a trading charge.

Question 144.
June 2016: Pride Ltd. has profit after tax ₹ 90,000, depreciation ₹ 17,000, and decrease of debtors ₹ 20,000. The cash generated from operating activities will be …………..
(A) ₹ 87,000
(B) ₹ 93,000
(C) ₹ 1,27,000
(D) ₹ 53,000
Answer:
(C) ₹ 1,27,000
Cash Flow Statement – Corporate and Management Accounting MCQ 44

Question 145.
June 2016: The purchase of machinery by issuing long-term notes payable should be reported as a
(A) Non-cash investing and financing activity
(B) Cash outflow in the operating activity
(C) Cash outflow in the investing activity
(D) Cash outflow in the financing activity
Answer:
(A) Non-cash investing and financing activity

Question 146.
June 2016: Which statement contains opening as well as closing balances of cash and cash equivalents and prepared on accrual basis —
(A) Cash flow statement
(B) Fund flow statement
(C) Both (A) and (B) above
(D) Statement of income & expenditure
Answer:
(A) Cash flow statement

Question 147.
Dec 2016: Income from investments is a cash flow from —
(A) Operating activities
(B) Investing activities
(C) Financing activities
(D) None of the above
Answer:
(B) Investing activities

Question 148.
Dec 2016: A cash flow statement is based upon while fund flow statement recognizes
(A) Cash basis of accounting; accrual basis of accounting
(B) Accrual basis of accounting; conventional basis of accounting
(C) Mercantile basis of accounting; cash basis of accounting
(D) Cash basis of accounting; cash basis of accounting
Answer:
(A) Cash basis of accounting; accrual basis of accounting

Question 149.
Dec 2016: Consider the following statements:
(1) Depreciation reduces tax liability; hence it is a source of funds.
(2) Decrease in current liabilities during the year results in an increase in working capital.
(3) The term cash equivalents include short-term marketable investments.
(4) Conversion of debentures into equity shares appears in funds flow statement.
(5) Only non-cash expenses are added to net profit to find out funds from operation.
Select the incorrect statements from the options given below —
(A) (1), (3), (4) and (5)
(B) (1), (2), (4) and (5)
(C) (1), (4) and (5)
(D) (2), (3) and (4)
Answer:
(C) (1), (4) and (5)

Question 150.
Dec 2016: Preference share capital of ₹ 5,00,000 was redeemed at a premium of 10%, partly out of proceeds of issue of 20,000 equity shares of ₹ 10 each issued at 10% premium and partly out of profits otherwise available for dividends. Choose the correct effect on different activities of cash flow statement from the options given below:
(A) In financing activities, cash outflow ₹ 5,50,000 and cash inflow ₹ 2,20,000.
(B) In financing activities, cash outflow ₹ 5,50,000 and in investing activities, cash inflow ₹ 2,20,000
(C) Net ₹ 3,30,000 will be outflow in operating activities
(D) In investing activities cash outflow of 15,50,000 and in financing activities cash inflow of ₹ 2,20,000
Answer:
(A) In financing activities, cash outflow ₹ 5,50,000 and cash inflow ₹ 2,20,000.

Question 151.
2017: In cash flow, income tax paid is treated as:
(A) Operating activity
(B) Investing activity
(C) Financing activity
(D) Not shown any where
Answer:
(A) Operating activity

Question 152.
June 2017: By ‘Cash Equivalents’ we mean:
(A) Bank Balance
(B) Short-term highly Liquid Securities
(C) Investments
(D) Investments in debenture
Answer:
(B) Short-term highly Liquid Securities

Question 153.
June 2017: Match the following:
Cash Flow Statement – Corporate and Management Accounting MCQ 21
Cash Flow Statement – Corporate and Management Accounting MCQ 22
Answer:
(B)

Question 154.
June 2017: Arrange the following categories of cash inflows and cash outflows in a correct order:
(1) Cash from investing activities
(2) Cash from financing activities
(3) Cash from operating activities
Select the correct answer from the options given below
(A) 2,1 and 3
(B) 1,3 and 2
(C) 3,2 and 1
(D) 3,1 and 2
Answer:
(D) 3,1 and 2

Question 155.
Dec 2017: In case of financial enterprises, cash flows arising from are classified as cash flows from operating activities.
(A) Interest Paid
(B) Interest Received
(C) Dividend Received
(D) All of the above
Answer:
(D) All of the above

Question 156.
Dec 2017: Some of the account balances of KK Ltd. are as follows in its balance sheet:
June 2018: In cash flow statement, proceeds from sales of an asset will be considered as:
Cash Flow Statement – Corporate and Management Accounting MCQ 23
If the interest paid on debentures was 20,000, the net cash flows from financing activities were:
(A) 1,75,000
(B) 1,55,000
(C) 2,05,000
(D) 2,25,000
Answer:
(B) 1,55,000
Cash Flow Statement – Corporate and Management Accounting MCQ 45

Question 157.
Dec 2017: Both cash how statement and fund flow statement are:
(A) Prepared on cash basis
(B) Prepared on the basis of working capital
(C) Useful for long-term analysis
(D) None of the above
Answer:
(D) None of the above

Question 158.
June 2018: Which of the following involves a movement of cash?
(A) Abonusissue
(B) A right issue
(C) Depreciation of fixed assets
(D) Provision for taxes
Answer:
(C) Depreciation of fixed assets

Question 159.
June 2018: The following item would be classified as operating activities in the statement of cash lows: .
(A) Acquisition of equipment, payment of dividends
(B) Proceeds from borrowing, payment of interest
(C) Payment of salaries, cash received from sale of goods
(D) Payments on loan, payments for taxes
Answer:
(C) Payment of salaries, cash received from sale of goods

Question 160.
June 2018: When the instalment paid in respect of a fixed asset acquire on deferred payment basis includes both
interest and loan, the interest element is classified under activities and the loan element is classified under
activities.
(A) Financing, Investing
(B) Investing, Operating
(C) Operating, Financing
(D) Investing, Operating
Answer:
(A) Financing, Investing

Question 161.
June 2018: In cash flow statement, proceeds from sales of an asset will be considered as:
(A) Investing activity
(B) Financing activity
(C) Operating activity
(D) None of the above
Answer:
(A) Investing activity

Question 162.
June 2018: Which one of the following is fake?
(A) If cash outflows exceed cash inflows on an ongoing basis, the business will eventually run out of cash.
(B) Rapidly expanding companies can sometimes face a cash shortage.
(C) Cash is the lifeblood of a business and without it the business will die.
(D) A profitable company will never run out of cash.
Answer:
(D) A profitable company will never run out of cash.

Question 163.
Dec 2018: In case of financial enterprises, cash flow arising from interest and dividends should be classified as cash flow from:
(A) Operating Activities
(B) Financing Activities
(C) Investing Activities
(D) Business Activities
Answer:
(A) Operating Activities

Question 164.
Dec 2018: Investments at the beginning and at the end of the year 2017-18 were ₹ 255 Lakh and ₹ 210 Lakh respectively. During the year 40 percent of original investments were sold at a profit of ₹ 63 Lakh. Amount of cash inflow and outflow respectively from Investments will be:
(A) ₹ 102 Lakh and ₹ 57 Lakh
(B) ₹ 165 Lakh and ₹ 57 Lakh
(C) ₹ 45 Lakh and Nil
(D) ₹ 147 Lakh and ₹ 39 Lakh
Answer:
(B) ₹ 165 Lakh and ₹ 57 Lakh
Cash Flow Statement – Corporate and Management Accounting MCQ 46

Question 165.
June 2019: The following information of a non-financial enterprise is given:
Purchase of fixed assets ₹ 40,000; Proceeds from sale of equipments ₹ 35,000; Interest received ₹ 3,000; Interest paid ₹ 6,000, Dividend received ₹ 4,000 and Dividend paid ₹ 15,000. Amount of cash from investing activities will be –
(A) ₹ 1,000
(B) ₹ (4,000)
(C) ₹ 2,000
(D) ₹ (2,000)
Answer:
(C) ₹ 2,000
– 40,000 + 35,000 + 3,000 + 4,000 = 2,000

Question 166.
June 2019: PQR Ltd. have the following balances:
Investment at the end of the year 2017 – 18 ₹ 85,000, Investment at the end of the year 2018-19 ₹ 70,000. During the year the company had sold 40% of its original investment at a profit of 50%. What will be the amount of cash inflow and cash outflow from the investment:
(A) ₹ 51,000 and ₹ 36,000
(B) ₹ 51,000 and ₹ 19,000
(C) ₹ 1,21,000 and ₹ 85,000
(D) ₹ 1,21,000 and ₹ 19,000
Answer:
(B) ₹ 51,000 and ₹ 19,000
Cash Flow Statement – Corporate and Management Accounting MCQ 47