Chapter 10: Cash Flow Statement — Online MCQ Test
ACCOUNTANCY · CLASS 12 SECOND PUC · Karnataka State Board
Practice Chapter 10: Cash Flow Statement with a free chapter-wise online MCQ test.
This chapter covers: Cash Flow Statement AS 3 Indirect Method Operating Activities Investing Activities Financing Activities Cash Inflow Cash Outflow Non Cash Transactions Net Cash Flow Working Capital.
AI-generated questions from basic to board-exam level, with instant results and explanations.
Chapter 10: Cash Flow Statement — Important Questions & Answers
A Cash Flow Statement shows the inflows and outflows of which item during an accounting period?
- A. Cash and cash equivalents
- B. Only cash in hand
- C. Only net profit
- D. Only working capital
Answer: A. Cash and cash equivalents
As per AS 3, a Cash Flow Statement reports changes in cash and cash equivalents during a period.
As per AS 3, a Cash Flow Statement reports changes in cash and cash equivalents during a period.
As per AS 3, cash flows are classified into how many main activities?
- A. Two
- B. Three
- C. Four
- D. Five
Answer: B. Three
Cash flows are classified into operating, investing and financing activities.
Cash flows are classified into operating, investing and financing activities.
Which of the following is an operating activity for a non-financial enterprise?
- A. Issue of shares
- B. Purchase of machinery
- C. Cash received from sale of goods
- D. Repayment of long-term loan
Answer: C. Cash received from sale of goods
Operating activities are the principal revenue-producing activities of an enterprise, such as sale of goods.
Operating activities are the principal revenue-producing activities of an enterprise, such as sale of goods.
Cash equivalents are short-term, highly liquid investments that are readily convertible into known amounts of cash and have:
- A. High risk of change in value
- B. Insignificant risk of change in value
- C. No maturity period
- D. Maturity of more than one year
Answer: B. Insignificant risk of change in value
Cash equivalents carry insignificant risk of change in value and are held for meeting short-term cash commitments.
Cash equivalents carry insignificant risk of change in value and are held for meeting short-term cash commitments.
A company has net profit before tax of ₹1,20,000, depreciation of ₹20,000, profit on sale of machinery of ₹5,000, increase in inventory of ₹10,000, decrease in debtors of ₹8,000 and increase in creditors of ₹6,000. Cash from operations before tax will be:
- A. ₹1,19,000
- B. ₹1,29,000
- C. ₹1,39,000
- D. ₹1,49,000
Answer: C. ₹1,39,000
Cash from operations = 1,20,000 + 20,000 - 5,000 - 10,000 + 8,000 + 6,000 = ₹1,39,000.
Cash from operations = 1,20,000 + 20,000 - 5,000 - 10,000 + 8,000 + 6,000 = ₹1,39,000.
Which of the following items is deducted while calculating cash flow from operating activities under the indirect method?
- A. Depreciation
- B. Loss on sale of fixed asset
- C. Increase in trade receivables
- D. Decrease in inventory
Answer: C. Increase in trade receivables
An increase in trade receivables means revenue has not been collected in cash, so it is deducted from operating profit.
An increase in trade receivables means revenue has not been collected in cash, so it is deducted from operating profit.
Net profit before tax is ₹2,50,000. Depreciation is ₹40,000, loss on sale of furniture is ₹12,000, interest income is ₹8,000, increase in receivables is ₹30,000, decrease in inventory is ₹20,000, decrease in payables is ₹10,000 and tax paid is ₹50,000. Cash flow from operating activities is:
- A. ₹2,04,000
- B. ₹2,24,000
- C. ₹2,44,000
- D. ₹2,94,000
Answer: B. ₹2,24,000
Operating profit before working capital = 2,50,000 + 40,000 + 12,000 - 8,000 = ₹2,94,000. After working capital changes and tax: 2,94,000 - 30,000 + 20,000 - 10,000 - 50,000 = ₹2,24,000.
Operating profit before working capital = 2,50,000 + 40,000 + 12,000 - 8,000 = ₹2,94,000. After working capital changes and tax: 2,94,000 - 30,000 + 20,000 - 10,000 - 50,000 = ₹2,24,000.
Machinery account shows opening balance ₹5,00,000 and closing balance ₹6,80,000. Machinery costing ₹80,000 was sold during the year. No revaluation took place. Cash paid for purchase of machinery was:
- A. ₹1,00,000
- B. ₹1,80,000
- C. ₹2,60,000
- D. ₹7,60,000
Answer: C. ₹2,60,000
Purchase = Closing balance - Opening balance + Cost of machinery sold = 6,80,000 - 5,00,000 + 80,000 = ₹2,60,000.
Purchase = Closing balance - Opening balance + Cost of machinery sold = 6,80,000 - 5,00,000 + 80,000 = ₹2,60,000.
Machinery at cost was ₹8,00,000 at the beginning and ₹9,50,000 at the end. Machinery costing ₹1,00,000 was sold during the year. Accumulated depreciation was ₹2,00,000 at the beginning and ₹2,40,000 at the end, and depreciation charged during the year was ₹90,000. If the machinery was sold at a loss of ₹5,000, net cash flow from machinery-related investing activity is:
- A. ₹1,55,000 outflow
- B. ₹2,05,000 outflow
- C. ₹2,50,000 outflow
- D. ₹2,95,000 outflow
Answer: B. ₹2,05,000 outflow
Purchase of machinery = 9,50,000 - 8,00,000 + 1,00,000 = ₹2,50,000. Depreciation on machinery sold = 2,00,000 + 90,000 - 2,40,000 = ₹50,000, so sale proceeds = ₹50,000 book value - ₹5,000 loss = ₹45,000; net outflow = ₹2,05,000.
Purchase of machinery = 9,50,000 - 8,00,000 + 1,00,000 = ₹2,50,000. Depreciation on machinery sold = 2,00,000 + 90,000 - 2,40,000 = ₹50,000, so sale proceeds = ₹50,000 book value - ₹5,000 loss = ₹45,000; net outflow = ₹2,05,000.
Profit before tax is ₹4,00,000. It includes dividend income ₹30,000 and profit on sale of investment ₹20,000, and it is after charging depreciation ₹60,000 and interest expense ₹50,000. Inventory increased by ₹40,000, trade receivables decreased by ₹25,000, trade payables increased by ₹35,000, prepaid expenses increased by ₹10,000, outstanding expenses decreased by ₹5,000 and tax paid was ₹70,000. For a non-financial company, cash flow from operating activities is:
- A. ₹3,45,000
- B. ₹3,65,000
- C. ₹3,95,000
- D. ₹4,65,000
Answer: C. ₹3,95,000
Operating profit before working capital = 4,00,000 + 60,000 + 50,000 - 30,000 - 20,000 = ₹4,60,000. Working capital net adjustment is +₹5,000, and after tax paid ₹70,000, CFO = ₹3,95,000.
Operating profit before working capital = 4,00,000 + 60,000 + 50,000 - 30,000 - 20,000 = ₹4,60,000. Working capital net adjustment is +₹5,000, and after tax paid ₹70,000, CFO = ₹3,95,000.