CBSE Class 12 Accountancy Cash Flow Statement MCQs Set B

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: Purchase of marketable securities will result in _________

a) No effect on cash and cash equivalents

b) Increase in Investing activities.

c) Increase in cash and cash equivalents

d) Decrease in cash and cash equivalents

Answer: No effect on cash and cash equivalents

Question: Cash Flow from Operating activities + Cash flow from investing activities + Cash flow from financing activities =?

a) Net Increase/Decrease in cash & cash equivalents

b) Net Increase/Decrease in Non-current Assets

c) Net Increase/Decrease in Long term Loans

d) Net Increase/Decrease in Capital

Answer: Net Increase/Decrease in cash & cash equivalents

Question: Is payment for purchase of fixed assets will be classified as operating activity for both finance and non finance company

a) No its investing activities

b) No Its financing activities

c) Not to be recorded

d) All of the options

Answer: No its investing activities

Question: Purchase and Sales of Shares by a company comes under

a) Investing activities

b) Operating Activities

c) Not recorded

d) Financing Activities

Answer: Investing 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: 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: In the statement of cash flows (indirect method) a decrease in inventory should be reported as__________

a) Addition

b) Deduction

c) Investing activity

d) Not reported

Answer: Addition

Question: Which activity is the main revenue generating activities of the enterprises

a) Cash flow from operating activities

b) Cash flow from management activities

c) Cash flow from investment activities

d) Non Cash transactions

Answer: Cash flow from operating activities

Question: Which of the following transaction is untrue regarding the limitations of cash flow statement?

a) It is not used for judging the profitability of enterprises

b) To ascertain the net changes in cash and cash equivalents

c) To help in short term financial planning.

d) To ascertain the liquidity of enterprises

Answer: It is not used for judging the profitability of enterprises 

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: 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: Which of the following is not concerned with Financing Activity

a) Sale of Non-current investment

b) Loan taken from bank

c) Issue of Equity Shares

d) Increase in Securities Premium

Answer: Sale of Non-current investment

Question: The various activities operating, investing and financing classified as per ___related to cash flow statement

a) AS 3 (revised)

b) AS 4 (revised)

c) AS 5 (revised)

d) AS 6 (revised)

Answer: AS 3 (revised)

Question: Which of the following is not a cash inflow?

a) Goods purchased in cash

b) Sale of asset at loss

c) Goods sold in cash

d) Interest received on investment

Answer: Goods purchased in cash

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: ______ are highly liquid assets that can be converted into cash shortly.

a) Cash Equivalents

b) Inventories

c) Non-current Investments

d) Non-current Assets

Answer: Cash Equivalents

Question: Repayment of long term loans _________

a) Financing Activities

b) Operating Activities

c) Investing Activities

d) Both Investing Activities and Operating Activities

Answer: Financing Activities

Question: Buy Back of equity shares is concerned with_________

a) Financing Activities

b) Investing Activities

c) Operating Activities

d) Both Investing Activities and Operating Activities

Answer: Financing 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: 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: An increase in Bonds Payable (a long term liability).

a) Financing

b) Investing

c) Operating

d) Supplemental

Answer: Financing

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: 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: Cash flow statement means inflow and outflow of cash of a particular period which are divided into:

a) All of the options

b) Cash flow from operating activities

c) Cash flow from investing activities

d) Cash flow from financing activities

Answer: All of the options

Question: Which is the cash equivalents

a) All of the options

b) Convertible into cash within three months.

c) Highly liquid and capable of paying debts.

d) Easily convertible into cash and risk-free.

Answer: All of the options

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: Limitations of Cash Flow Statementv are

a) All of the options

b) Cash flow statement does not consider non-cash item

c) Cash flow statement cannot replace fund flow statement or income statement

d) It cannot be used for the purpose of comparison over a period of time

Answer: All of the options

Question: Sales of copyrights is concern with

a) Investing activities

b) Operating activities

c) Financing activities

d) All of the options

Answer: Investing activities

Question: Provision for doubtful debts will appear under

a) Short term provisions

b) Long term provisions

c) Reserve & Surplus

d) Other current assets

Answer: Short term provisions

Question: Cash and cash equivalent dont include

a) Inventories

b) Cash

c) Cash at bank

d) Cheques in hand

Answer: Inventories

Question: Loose tools are shown under

a) Inventories

b) Cash

c) Current Assets

d) Liabilities

Answer: Inventories

Question: Which are the Operating Activities

a) All of the options

b) Payment of employee

c) Purchase of inventory

d) Proceeds from sale of goods

Answer: All of the options

Question: Which are the Investing Activities

a) All of the options

b) Purchase of property

c) Sale of property

d) Proceeds from issue of Shares

Answer: All of the options

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: Cash Outflows from financing activities are

a) All of the options

b) Cash repayments of amounts borrowed.

c) Interest paid on debentures and long-term loans and advances

d) Dividends paid on equity and preference capital

Answer: All of the options

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 Inflows from Investing Activities are

a) All of the options

b) Cash receipt from disposal of fixed assets

c) Interest received in cash from loans and advances

d) Dividend received from investments in other enterprises

Answer: All of the options

Question: Cash Outflows from investing activities are

a) All of the options

b) Cash payments to acquire fixed assets

c) Cash payments to acquire shares, warrants

d) Cash payments to acquire shares, warrants

Answer: All of the options

Question: Cash Outflows from operating activities are

a) All of the options

b) Cash payments to suppliers for goods and services

c) Cash payments to and on behalf of the employees

d) Cash payments to an insurance enterprise for premiums and claims

Answer: All of the options

Question: Which of the following is not application of cash?

a) Increase in Debtors

b) Increase in Inventory

c) Increase in Bills Payable

d) Increase in Prepaid Expenses

Answer: C

Question: Cash from operating activities consists of:

a) Operating Profit

b) Decrease/Increase in Current Assets

c) Decrease/Increase in Current Assets

d) All of the Above

Answer: D

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: D

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: D

Question: Mention the net amount of‘Source’ or ‘Use’ of cash when a fixed asset having book value of Rs. 15,000 is sold at a loss of Rs. 5,000.

a) Use Rs.5,000

b) Source Rs. 10,000

c) Use 115,000

d) Source 115,000

Answer: B

Question: Dividend paid by a Trading 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: C

Question: An example of Cash Flows from Financing Activity is :

a) Credit Revenue from Operations

b) Cash receipts from issue of shares

c) Sale of Investments

d) Interest Received

Answer: B

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: C

Question: If 6% Pref. share capital Rs.2,00,000 were redeemed at a premium of 5%, while preparing Cash Flow Statement its effect on cash flow will be :

a) Cash used from financing activities Rs.2,12,000

b) Cash received from financing activities Rs.2,12,000

c) Cash used (Payment) from financial activities Rs.2,10,000

d) Cash used (Payment) from financial activities Rs.2,00,000

Answer: C

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: A

Question: Exe Ltd. has balance in Provision for Tax Account of Rs. 50,000 and Rs. 75,000'as on 31st March, 2018 and 2019 respectively. it made a provision for tax during the year of € 65,000. The amount of tax paid during the year was,

a) Rs. 50,000.

b) Rs. 60,000.

c) Rs. 40,000.

d) Rs. 75,000

Answer: C

Question: While preparing Cash Flow Statement, ‘interest paid on debentures’ will be considered as a

a) Operating Activity.

b) Financing Activity.

c) investing Activity.

d) Both Operating and Financing Activity.

Answer: B

Question: Dividend paid by a financial company is shown as cash outflow under

a) Operating Activities.

b) investing Activities.

c) Financing Activities.

d) Cash and Cash Equivalent.

Answer: C

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: C

Question: Equity dividend paid should be classifieds cash outflow from

a) Financing activities

b) Operating activities

c) Investing activities

d) All of the options

Answer: Financing activities

Question: Cash flows are

a) Inflow and outflow of cash and Inflow and outflow of cash equivalent

b) Inflow and outflow of cash

c) Inflow and outflow of cash equivalent

d) None of the options

Answer: Inflow and outflow of cash and Inflow and outflow of cash equivalent

Question: Principal revenue generating activities of an enterprise are called as

a) Operating activities

b) Financing activities

c) Investing activities

d) All of the options

Answer: Operating activities

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: Cash payments to and on behalf of employees is an example of cash flows from

a) Operating activities

b) Financing activities

c) Investing activities

d) All of the options

Answer: Operating activities

Question: Activities that result in changes in the size and composition of the equity capital and borrowings of an entity are called

a) Financing activities

b) Operating activities

c) Investing activities

d) All of the options

Answer: Financing activities

Question: Which of the following categories is not used to classify cash flows in the cash flow statement

a) Managing Activities

b) Operating activities section

c) Investing activities section

d) Financing activities section

Answer: Managing Activities

Question: The amortization of the cost of an intangible asset

a) Operating Activity

b) Investing Activity

c) Financing Activity

d) Supplemental Activity

Answer: Operating Activity

Question: The exchange or conversion of long-term bonds into common stock.

a) Supplemental Activity

b) Operating Activity

c) Investing Activity

d) Financing Activity

Answer: Supplemental Activity

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: A decrease in the current asset account Prepaid Insurance.

a) Operating Activity

b) Investing Activity

c) Financing Activity

d) Supplemental Activity

Answer: Operating Activity

Question: An increase in Bonds Payable (a long term liability).

a) Financing Activity

b) Investing Activity

c) Operating Activity

d) Supplemental Activity

Answer: Financing Activity

Question: A decrease in the balance of Accounts Receivable.

a) Operating Activity

b) Investing Activity

c) Financing Activity

d) Supplemental Activity

Answer: Operating Activity

Question: The purchase of a new delivery truck to be used in the business.

a) Investing Activity

b) Operating Activity

c) Financing Activity

d) Supplemental Activity

Answer: Investing Activity

Question: Purchase of Treasury Stock (companys own stock).

a) Financing Activity

b) Investing Activity

c) Operating Activity

d) Supplemental Activity

Answer: Financing Activity

Question: Retirement of long term Bonds Payable.

a) Financing Activity

b) Investing Activity

c) Operating Activity

d) Supplemental Activity

Answer: Financing Activity

Question: An increase in the balance in Accounts Payable

a) Operating Activity

b) Investing Activity

c) Financing Activity

d) Supplemental Activity

Answer: Operating Activity

Question: Gain on the Sale of Automobile formerly used in the business.

a) Operating Activity

b) Investing Activity

c) Financing Activity

d) Supplemental Activity

Answer: Operating Activity

Question: Declaration and payment of dividends on companys stock.

a) Financing Activity

b) Investing Activity

c) Operating Activity

d) Supplemental Activity

Answer: Financing Activity

Question: Proceeds from the sale of equipment used in the business.

a) Investing Activity

b) Operating Activity

c) Financing Activity

d) Supplemental Activity

Answer: Investing Activity

Question: Depreciation Expense is

a) Operating Activity

b) Investing Activity

c) Financing Activity

d) Supplemental Activity

Answer: Operating Activity

Question: The statement of cash flows is designed with the purpose of helping users to assess each of the following, except

a) The profitability of the entity

b) The major sources of cash receipts during the period

c) The reasons why net cash flows from operating activities differ from net income

d) The ability of a entity to remain liquid

Answer: The profitability of the entity

Question: The indirect method of preparing a statement of cash flows is also known as

a) Reconciliation method

b) Income statement method

c) Balance sheet method

d) Reverse method

Answer: Reconciliation method

Question: Which of the following items affects net income but does not affect cash?

a) All of these

b) Depreciation of fixed assets

c) Amortization of intangible assets & bond discounts

d) Depletion of natural resources

Answer: All of these

Question: Under indirect method of preparing statement of cash flows, depreciation expense affects

a) Operating activities section

b) Investing activities section

c) Financing activities section

d) Notes to the financial statements

Answer: Operating activities section

Question: Significant non cash investing and financing activities are reported in the

a) Foot notes or separate notes to the financial statements

b) Operating activities section of statement of cash flows

c) Investing activities section of statement of cash flows

d) Financing activities section of statement of cash flows

Answer: Foot notes or separate notes to the financial statements

Question: Which of the following is not a non-cash investing and financing activity

a) Repayment of short-term loan

b) Purchase of land by issuing common stock

c) Conversion of bonds into common stock

d) Conversion of preferred stock into common stock

Answer: Repayment of short-term loan

Question: Which of the following is not a financing activity

a) Sale of investment

b) Purchase of treasury stock

c) Issuance of common stock

d) Issuance of bonds payable

Answer: Sale of investment

Question: Which of the following is not an operating cash flow

a) Purchase of equipment for cash

b) Collection of cash from receivables

c) Payment of income tax

d) Payment of cash for operating expenses

Answer: Purchase of equipment for cash

Question: A statement of cash flows has

a) 3 sections

b) 4 sections

c) 5 sections

d) 6 sections

Answer: 3 sections