CUET Accountancy MCQs Unit VII Statement of Changes in Financial Position

Question: Sale of Copyrights is concerned with_______

a) Investing Activities

b) Operating Activities

c) Both Operating Activities and Financing Activities

d) Financing Activities

Answer: Investing Activities

Question: Cash flow arises when the net effect of a transaction _____ the amount of cash or cash equivalents

a) Either increase or decrease

b) Only Increase

c) Only decrease

d) All of the options

Answer: Either increase or decrease

Question: A financial statement that shows the inflows and outflows of cash during a particular period of time is known as

a) Statement of cash flows

b) Income statement

c) Statement of retained earnings

d) Balance sheet

Answer: Statement of cash flows

Question: The main difference in direct and indirect method is to calculate the

a) Cash flow from operating activities

b) Cash Flow from Financing Activities

c) Cash Flow from Investing Activities

d) All of the options

Answer: Cash flow from operating activities

Question: Decrease in the value of Trade Receivable will be

a) Added in operating activities

b) Added in Investing Activities

c) Deducted in operating activities

d) All of the options

Answer: Added in operating activities

Question: In case of other enterprises cash flow arising from interest paid should be classified as cash flow from ________ while dividends and interest received should be stated as cash flow from ____

a) Financing activities, investing activities

b) Operating activities, financing activities

c) Investing activities, operating activities

d) All of the options

Answer: Financing activities, investing activities

Question: What are the objectives of preparing cash flow statement

a) All of the options

b) To determine the liquidity position of the organisation

c) To know about the requirement of cash in future

d) To ascertain the gross inflows and outflows of cash

Answer: All of the options

Question: Short term highly liquid investments which are readily convertible into known amount of cash and which are subject to an insignificant risk of change in the value are called _______

a) Cash Equivalents

b) Cash at Bank

c) Non-current Assets

d) Intangible Assets

Answer: Cash Equivalents

Question: _________ reconciles the opening cash balance with the closing cash balance of a given period on the basis of net decrease or increase in cash during that period.

a) Cash Flow Statement

b) Funds Flow Statement

c) Both

d) None of the options

Answer: Cash Flow Statement

Question: The cash flow statement begins with the

a) Cash Flow from Operating Activities

b) Cash Flow from Financing Activities

c) Cash Flow from Investing Activities

d) None of these

Answer: Cash Flow from Operating Activities

Question: Purchase of shares or debentures are concerned with________

a) Investing Activities

b) Both Operating Activities and Financing Activities

c) Operating Activities

d) Financing Activities

Answer: Investing Activities

Question: Proposed Dividend is classified under

a) Short term provisions

b) Reserves and Surplus

c) Non-current Liabilities

d) Long term provisions

Answer: Short term provisions

Question: If the net profits earned during the year is Rs. 50,000 and the amount of debtors in the beginning and the end of the year is Rs. 10,000 and Rs.20,000 respectively, then the cash from operating activities will be equal to Rs.

a) Rs. 40,000

b) Rs. 60,000

c) Rs. 70,000

d) Rs. 50000

Answer: Rs. 40,000

Question: Which is the Importance of cash flow statement

a) All of the options

b) Evaluation of cash position

c) Getting an idea of future cash position

d) Picture of liquidity position

Answer: All of the options

Question: While preparing Cash Flow Statement, non-cash items and non-operating items are not required to be adjusted under________

a) Direct method

b) Indirect method

c) Average method

d) All of the options

Answer: Direct method

Question: Increase in the amount of bills receivable results in

a) Decrease in cash

b) Increase in cash

c) No change in cash

d) All of the options

Answer: Decrease in cash

Question: Which are the Financing Activities

a) All of the options

b) Redemption of Share

c) Redemption of debentures

d) Payment of dividends

Answer: All of the options

Question: While calculating cash flow from operating activities which will be deducted:

a) Decrease in Prepaid Expenses

b) Increase in Trade Payables

c) Increase in Trade Receivables

d) Decrease in Trade Receivables

Answer: Increase in Trade Receivables

Question: An Example of cash flow from financing activity is :

a) Payment of dividend

b) Receipt of dividend on investment

c) Cash received from customer

d) Purchase of fixed asset

Answer: Payment of dividend

Question: While calculating operating profit which will be added to net profit:

a) Preliminary Expenses Written off

b) Depreciation

c) Loss on Sale of Asset

d) All of the Above

Answer: All of the Above

Question: Fine Garments Ltd. is engaged in the export of readymade garments. The company purchased a machinery of Rs. 10,00,000 for the use in packaging of such garments. Cash flow due to the purchase of machinery will be cash flow from :

a) Cash Flow from Operating Activities

b) Cash Flow from Investing Activities

c) Cash Flow from Financing Activities

d) Cash Equivalent

Answer: Cash Flow from Investing Activities

Question: Cash deposit with the bank with a maturity date after two months belongs to which of the following in the cash flow statement:

a) Investing activities

b) Financing activities

c) Cash and Cash equivalents

d) Operating activities

Answer: Cash and Cash equivalents

Question: Refer to Q. 10, calculate the amount of purchase of Machinery.

a) Rs. 1,50,000

b) Rs. 3,00,000

c) Rs. 11,50,000

d) Rs. 50,000

Answer: Rs. 1,50,000

Question: In a statement of cash flows, a company investing in short-term financial investments and in fixed assets results in

a) Decreased cash

b) Increased cash

c) Increased liabilities

d) Increased equity

Answer: Decreased cash

Question: GSC Ltd. purchased machinery of Rs. 10,00,000 issuing a cheque of Rs. 2,50,000 and 10% Debentures of Rs. 7,50,000. ln the Cash Flow Statement, the transaction will be shown as

a) Outflow under Investing Activity Rs. 10,00,000, inflow under Financing Activity as Receipt for Debentures Rs. 7,50,000.

b) Outflow under investing Activity Rs. 2,50,000.

c) Inflow of Rs. 7,50,000 as Financing Activity.

d) None of the above.

Answer: Outflow under investing Activity Rs. 2,50,000.

Question: Dividend paid by a non-financial company is shown as

a) Operating Activity.

b) Investing Activity.

c) Financing Activity.

d) Cash and Cash Equivalent.

Answer: Financing Activity.

Question: In the case of financial enterprises, the cash flow resulting from interest and dividend received and interest paid should be classified as cash flow from

a) Operating activities

b) Financing activities

c) Investing activities

d) All of the options

Answer: Operating activities

Question: Increase in creditors results in _____________ of cash

a) Inflow cash

b) Outflow cash

c) No change in cash

d) All of the options

Answer: Inflow cash

Question: The principal revenue-producing activities of an entity are called

a) Operating activities

b) Financing activities

c) Investing activities

d) All of the options

Answer: Operating activities

Question: Which of the following are cash flow from operating activities

a) Cash Receipts from customers and Cash Paid to Supplier and Employees

b) Cash Receipts from customers

c) Cash Paid to Supplier and Employees

d) None of the options

Answer: Cash Receipts from customers and Cash Paid to Supplier and Employees

Question: The word fund means the difference of _______ and _______

a) Current Assets and Current Liabilities

b) Sundry Creditors and Sundry Debtors

c) Profit and Loss

d) All of the options

Answer: Current Assets and Current Liabilities

Question: A decrease in the current liability Income Taxes Payable.

a) Operating Activity

b) Investing Activity

c) Financing Activity

d) Supplemental Activity

Answer: Operating Activity 

Question: Redemption of preference Shares is concerned directly with

a) Financing Activities

b) Investing Activities

c) Operating Activities

d) All of the options

Answer: Financing Activities

Question: Cash deposit with the bank with a maturity date after two months belongs to which of the following

a) Cash and Cash Equivalents

b) Investing Activities

c) Financing Activities

d) Both Investing and Financing

Answer: Cash and Cash Equivalents

Question: Retirement of long term Bonds Payable.

a) Financing Activity

b) Investing Activity

c) Operating Activity

d) Supplemental Activity

Answer: Financing Activity

Question: Which of the following are cash flow from financing activities

a) Interest paid and Dividend paid

b) Interest paid

c) Dividend paid

d) None of the options

Answer: Interest paid and Dividend paid

Question: Mention the net amount of sourceof cash when a fixed asset (having book value of Rs. 15,000) is sold at a loss of Rs. 5,000.

a) Rs. 10000

b) Rs. 15000

c) Rs. 20000

d) Rs. 30000

Answer: Rs. 10000

Question: Depreciation Expense is

a) Operating Activity

b) Investing Activity

c) Financing Activity

d) Supplemental Activity

Answer: Operating Activity

Question: Dividend received by other than financial enterprise is shown in Cash Flow Statement under

a) Operating Activities.

b) Investing Activities.

c) Financing Activities.

d) General Activities.

Answer: Investing Activities.

Question: Increase in Bank Overdraft balance _____________

a) Add in Financing Activities

b) Add in Operating Activities

c) Less in Operating Activities

d) Less in Financing Activities

Answer: Add in Financing Activities

Question: A statement of cash flows has

a) 3 sections

b) 4 sections

c) 5 sections

d) 6 sections

Answer: 3 sections

Question: If the amount of goodwill is Rs.40,000 at the beginning of a year and Rs.48,000 at the end of that year then while preparing cash flow statement its effect on cash flow will be :

a) Cash used (Payment) in Investing Activities Rs. 8,000

b) Cash received from operating activities Rs. 8,000

c) Cash used (Payment) from Operating Activities Rs. 8,000

d) Cash used (Payment) from Financial Activities Rs.8,000

Answer: Cash used (Payment) in Investing Activities Rs. 8,000

Question: Buy-back of shares is an extra-ordinary item for

a) Operating Activities.

b) investing Activities.

c) Financing Activities.

d) Cash and Cash Equivalents.

Answer: Financing Activities.

Question: Which of the following is not a cash inflow

a) Decrease in creditors

b) Decrease in debtors

c) Issue of shares

d) Sale of fixed assets

Answer: Decrease in creditors

Question: For the calculation of cash flow from operating activities, payments and receipts shown in Profit & Loss account are converted into payments and receipts actually in cash by eliminating

a) Non-cash revenue from the revenue earned and Non-cash expenses from expenses incurred

b) Non-cash revenue from the revenue earned

c) Non-cash expenses from expenses incurred

d) None of the options

Answer: Non-cash revenue from the revenue earned and Non-cash expenses from expenses incurred

Question: Cash Flow Statement is also known as

a) Statement of Changes in Financial Position on Cash basis

b) Only inflow of cash

c) Only outlow of cash

d) None of the options

Answer: Statement of Changes in Financial Position on Cash basis

Question: Proposed Dividend is classified under

a) Short term provisions

b) Reserves and Surplus

c) Non-current Liabilities

d) Long term provisions

Answer: Short term provisions

Question: Dividend paid by a manufacturing company is classified under which kind of activity while preparing cash flow statement?

a) Cash Flow from Operating Activities

b) Cash Flow from Investing Activities

c) Cash Flow from Financing Activities

d) No Cash Flow

Answer: Cash Flow from Financing Activities

Question: Given salary expenses Rs 40,000, Outstanding in the beginning of the year: Rs 5,000 and outstanding at the end of the year Rs 10,000. Cash outflow on salary will be

a) Rs. 35000

b) Rs. 45,000

c) Rs. 55,000

d) Rs. 15,000

Answer: Rs. 35000

Question: Listed Enterprises need to prepare Cash Flow Statement only

a) Indirect method

b) Direct method

c) Average method

d) All of the options

Answer: Indirect method

Question: In indirect method, Which is used to calculate the amount of net cash flow from operating activities

a) Net income figure from the income statement

b) Net loss figure from Profit & Loss

c) Net Profit figure from Profit & Loss

d) All of the options

Answer: Net income figure from the income statement

Question: A Ltd., engaged in the business of retailing of two wheelers, invested Rs. 50,00,000 in the shares of a manufacturing company. Dividend received on this investment will be :

a) Cash Flow from Operating Activities

b) Cash Flow from Investing Activities

c) Cash Flow from Financing Activities

d) Cash Equivalent

Answer: Cash Flow from Investing Activities

Question: The objectives of Cash Flow Statement are

a) All of the options

b) Analysis of cash position

c) Short-term cash planning

d) Comparison of operating Performance

Answer: All of the options

Question: A cash flow statement is also prepared to determine the

a) Liquidity position of the organisation

b) Debt position of the organisation

c) Net Profit position of the organisation

d) Net Profit position of the organisation

Answer: Liquidity position of the organisation

Question: How will you treat payment of ‘Interest on Debentures’ while preparing a Cash Flow Statement?

a) Cash Flow from Operating Activities

b) Cash Flow from Investing Activities

c) Cash Flow from Financing Activities

d) Cash Equivalent

Answer: Cash Flow from Financing Activities

Question: Which of the following statements represent example of cash flow from investing activities?

a) Cash advances and loans made to third parties

b) Cash advances and loans made by financial enterprises

c) Both

d) None of the options

Answer: Cash advances and loans made to third parties

Question: Cash flows from investing activities are those

a) All of the options

b) Property

c) Plant

d) Intangible assets.

Answer: All of the options

Question: Operating activities is mainly concerned with____________

a) Current assets and current liabilities

b) Long term liabilities and stockholders equity

c) Long term assets

d) All of the options

Answer: Current assets and current liabilities

Question: Expenses paid in advance at the end of the year are______________the profit made during the year

a) Deducted from

b) Added to

c) Divided to

d) All of the options

Answer: Deducted from

Question: Cash and Cash Equivalents do not include_____

a) Stock Inventory

b) Cheques in hand

c) Cash at bank

d) Cash in hand

Answer: Stock Inventory

Question: The amount of operating expenses which are actually been paid in cash are shown under

a) Cash outflow on expenses

b) Cash flow from sales

c) Cash outflow on purchases

d) All of the options

Answer: Cash outflow on expenses

Question: Which of the following is an example of non cash Exp

a) Depreciation

b) Wages and salaries

c) Telephone Exp

d) All of the options

Answer: Depreciation

Question: Payment of dividend is classified as_____________

a) Financial activities

b) Operational activities

c) Both Operational activities and Investment activities

d) Investment activities

Answer: Financial activities

Question: Payment of income Tax is shown as

a) Operating Activities.

b) investing Activities.

c) Financing Activities.

d) General Activities.

Answer: Operating Activities.

Question: Which of the following is not a cash outflow

a) Increase in outstanding Exp.

b) Increase in Prepaid Exp.

c) Increase in Stock

d) Increase in Bills receivable

Answer: Increase in outstanding Exp.

Question: Which of the following statements represent example of cash flow from investing activities?

a) Cash advances and loans made to third parties

b) Cash advances and loans made by financial enterprises

c) Both

d) None of the options

Answer: Cash advances and loans made to third parties

Question: How will you deal increase in the balance of ‘Securities Premium Reserve’ while preparing a Cash Flow Statement?

a) Cash Flow from Operating Activities

b) Cash Flow from Investing Activities

c) Cash Flow from Financing Activities

d) Cash Equivalent

Answer: Cash Flow from Financing Activities

Question: A company receives a dividend of X2 Lakhs on its investment in other company’s shares. In case of a Finance Company, it will be classified under which kind of activity?

a) Cash Flow from Operating Activities

b) Cash Flow from Investing Activities

c) Cash Flow from Financing Activities

d) No Cash Flow

Answer: Cash Flow from Operating Activities

Question: Cash and cash equivalent dont include

a) Inventories

b) Cash

c) Cash at bank

d) Cheques in hand

Answer: Inventories

Question: Which of the following is not a cash inflow

a) Decrease in creditors

b) Decrease in debtors

c) Issue of shares

d) Sale of fixed assets

Answer: Decrease in creditors

Question: Which of the following is considered as Cash Equivalents?

a) Bank deposits for 2 months

b) Commercial Papers

c) Treasury Bills

d) All of the above

Answer: All of the above

Question: Cash Inflows from financing activities are

a) Cash proceeds from issuing shares and Cash proceeds from issuing debentures, loans, bonds

b) Cash proceeds from issuing shares

c) Cash proceeds from issuing debentures, loans, bonds

d) None of the options

Answer: Cash proceeds from issuing shares and Cash proceeds from issuing debentures, loans, bonds

Question: Cash flow statement is based upon _________ while Funds Flow Statement recognizes _______.

a) Cash basis of accounting, accrual basis of accounting

b) Accrual basis of accounting, cash basis of accounting

c) Both are based on cash basis of accounting

d) All of the options

Answer: Cash basis of accounting, accrual basis of accounting

Question: Angel Ltd., a stock broker, purchased 5,000 shares of Tata Housing Ltd. it is

a) Operating Activity.

b) Investing Activity.

c) Financing Activity.

d) General Activity.

Answer: Investing Activity.

Question: State whether cash deposited in bank will be classified under which kind of activity?

a) Cash Flow from Operating Activities

b) Cash Flow from Investing Activities

c) Cash Flow from Financing Activities

d) No Cash Flow

Answer: No Cash Flow

Question: ABC Ltd had investment of Rs 68,000 as on 31.3.2013 and investment of Rs 56,000 as on 31.3.2014. During the year ABC Ltd sold 40% of its investments being held in the beginning of period at a profit of Rs 16,800. Determine cash flow from investing activities.

a) Rs. 28,800

b) Rs. 59,200

c) Rs. 72,800

d) All of the options

Answer: Rs. 28,800

Question: Refund of income tax is a __________

a) Inflow cash

b) Outflow cash

c) No change in cash

d) All of the options

Answer: Inflow cash

Question: If a machine whose original cost is Rs.40,000 having accumulated depreciation Rs. 12,000, were sold for Rs.34,000 then while preparing Cash Flow Statement its effect on cash flow will be :

a) Cash flow from financing activities Rs.34,000

b) Cash flow from financing activities Rs. 6,000

c) Cash flow from investing activities Rs. 34,000

d) Cash flow from investing activities Rs. 6,000

Answer: Cash flow from investing activities Rs. 34,000