Cash Flow Statement(12th Grade > Accountancy ) Questions and Answers

Question 1.


A company sells old plant for Rs. 12,000 cash. The book value of the plant is Rs. 7,000. This transaction would affect:


  1.     Investing activities
  2.     Financing activities
  3.     Both investing and financing activities
  4.     None of these
Explanation:-
Answer: Option A. -> Investing activities
:
A

This transaction would affect investing activities since it is related to fixed assets


Question 2.


Sale of fixed assets is ___ while calculating cash flow from investing activities.


  1.     Not treated
  2.     Added
  3.     Subtracted
  4.     None of these
Explanation:-
Answer: Option B. -> Added
:
B

Sale of fixed assets is added while calculating cash flow from investing activities.


Question 3.


Which of the following would be considered a cash-flow item from a "financing" activity?


  1.     A cash outflow to the government for taxes
  2.     A cash outflow for payment of interest
  3.     A cash outflow for purchase of fixed asset
  4.     A cash outflow to purchase bonds issued by another company
Explanation:-
Answer: Option B. -> A cash outflow for payment of interest
:
B

A cash outflow for payment of interest would be considered a cash-flow item from a "financing" activity


Question 4.


When a fixed asset is bought as hire purchase, interest element is classified under ___.


  1.     Operating activities
  2.     Investing activities
  3.     Financing activities
  4.     None of these
Explanation:-
Answer: Option C. -> Financing activities
:
C

When a fixed asset is bought as hire purchase, interest element is classified under financing activities.


Question 5.


Cash flow from operating activities excludes money that is spent on capital expenditures. True or False


  1.     True
  2.     False
  3.     A cash outflow for purchase of fixed asset
  4.     A cash outflow to purchase bonds issued by another company
Explanation:-
Answer: Option A. -> True
:
A

True. Cash flow from operating activities excludes money that is spent on capital expenditures.


Question 6.


Which of the following statements are true?


  1.     Cash flow reveals only the inflow of cash
  2.     Cash flow reveals only the outflow of cash
  3.     Cash flow is a substitute for income statement
  4.     None of these
Explanation:-
Answer: Option D. -> None of these
:
D

None of these statements are true.


Question 7.


Non-cash expenses like depreciation, depletion & amortization expense are _______ to net profit before tax under indirect method.


  1.     Not treated
  2.     Added
  3.     Subtracted
  4.     None of these
Explanation:-
Answer: Option B. -> Added
:
B

Non-cash expenses like depreciation, depletion & amortization expense are added to net profit before tax under indirect method.


Question 8.


The statement of cash flows clarifies cash flows according to :


  1.     Operating and non-operating flows
  2.     Investing and Non-operating flows
  3.     Inflows and outflows
  4.     Operating, investing and financing activities
Explanation:-
Answer: Option D. -> Operating, investing and financing activities
:
D

The statement of cash flows clarifies cash flows according to operating, investing and financing activities.


Question 9.


Example of cash flow from financing activity is :


  1.     Payment of dividend
  2.     Receipt of dividend on investment
  3.     Cash received from customer
  4.     Purchase of fixed Asset
Explanation:-
Answer: Option A. -> Payment of dividend
:
A

Example of cash flow from financing activity is payment of dividend


Question 10.


Cash flow statement shows the activities:


  1.     Operating
  2.     Financial
  3.     Balance Sheet
  4.     All three- Operating, Financial, Balance sheet
Explanation:-
Answer: Option D. -> All three- Operating, Financial, Balance sheet
:
D

Cash flow statement shows the activities of - operating, financial, balance sheet items.


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