MCQs ON CASH FLOW STATEMENTS

A cash flow statement is a financial summary that gives total information with respect to all money inflows an organisation gets from its continuous operations and outside venture sources. It additionally incorporates all money or cash outflows that compensate for business exercises and speculations during a given period.

An organisation’s fiscal summaries offer financial backers and investigators a representation of the relative multitude of exchanges that go through the business, where each exchange adds to its prosperity.

Below is a list of multiple-choice questions and answers on cash flow statements to help students understand the topic better.

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

(A) Financing Activities.

(B) Cash and Cash Equivalent.

(C) Operating Activities.

(D) Investing Activities.

Answer B) Cash and Cash equivalent.

2. Interest paid by an investment company will come under which kind of activity while preparing a cash flow statement?

(A) Cash Flow from Investing Activities.

(B) Cash Flow from Financing Activities.

(C) No Cash Flow.

(D) Cash Flow from Operating Activities.

Answer D) Cash Flow from Operating Activities.

3. Dividend paid by a manufacturing company is classified under which kind of activity while preparing cash flow statements?

(A) Cash Flow from Investing Activities.

(B) Cash Flow from Financing Activities.

(C) No Cash Flow.

(D) Cash Flow from Operating Activities.

Answer B) Cash Flow from Financing Activities.

4. A Mutual Fund Company receives a dividend of ₹20 Lakhs on its investments in another company’s shares. Where will it appear in a cash flow statement?

(A) Cash Flow from Investing Activities.

(B) Cash Flow from Financing Activities.

(C) No Cash Flow.

(D) Cash Flow from Operating Activities.

Answer D) Cash Flow from Operating Activities.

5. How will you deal with an increase in the balance of ‘Securities Premium Reserve’ while preparing a cash flow statement?

(A) Cash Flow from Investing Activities.

(B) Cash Flow from Financing Activities.

(C) Cash Equivalent.

(D) Cash Flow from Operating Activities.

Answer B) Cash Flow from Financing Activities.

6. Financing activities bring changes in _____.

(A) Size and composition in owners’ equities.

(B) Borrowings of the enterprise.

(C) Size and composition of owners’ equities and borrowings of the enterprise.

(D) None of the options are correct.

Answer C) Size and composition of owners’ equities and borrowings of the enterprise.

7. According to Accounting standard 3 cash flows are classified into ______.

(A) Operating Activities and Investing Activities.

(B) Investing Activities and Financing Activities.

(C) Operating Activities and Financing Activities.

(D) Financing Activities, Operating Activities, and Investing Activities.

Answer D) Financing Activities, Operating Activities, and Investing Activities.

8. Cash Flow Statements is based upon ______, while Fund Flow Statements recognises ______.

(A) Accrual Basis of Accounting, and Cash Basis of Accounting.

(B) Both are based on the Cash Basis of Accounting.

(C) Cash Basis of Accounting, and Accrual Basis of Accounting.

(D) All of the options are correct.

Answer C) Cash Basis of Accounting and Accrual Basis of Accounting.

9. When fixed assets are bought on hire purchase, the interest element is classified under ______, and the loan element is classified under _____.

(A) Operating Activities, and Financing Activities.

(B) Financing Activities, and Operating Activities.

(C) Financing Activities, and Investing Activities.

(D) All of the options are correct.

Answer C) Financing Activities, and Investing Activities.

10. A financial statement that portrays the cash inflows and outflows of cash during a particular period of time is called _____.

(A) An Income Statement.

(B) Statement of Retained Earnings.

(C) Balance Sheet.

(D) Statement of Cash Flow.

Answer D) Statement of Cash Flow.

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