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This set of Analysis of Financial Statements Multiple Choice Questions & Answers (MCQs) focuses on Cash Flow Statement

Q1 | 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 ____.
  • operating activities, financing activities
  • financing activities, investing activities
  • investing activities, operating activities
  • none of the above
Q2 | When a fixed asset is bought as hire purchase, interest element is classified under ______ and loanelement is classified under________.
  • operating activities, financing activities
  • financing activities, investing activities
  • investing activities, operating activities
  • none of the above
Q3 | Which of the following statements are false?
  • old furniture written off doesn’t affect cash flow.
  • cash flow statement is a substitute for cash account.
  • appropriation of retained earnings is not shown in cash flow statement.
  • net cash flow during a period can never be negative.
Q4 | Which of the following is not a cash outflow?
  • increase in prepaid expenses
  • increase in debtors
  • increase in stock
  • increase in creditors
Q5 | Cash flow statement is prepared for financial planning of
  • long range
  • medium range
  • short range
  • very long range
Q6 | Which of the following is source of cash?
  • cash deposited into bank
  • cash withdrawn from bank
  • sale of goods costing ₹10,000 for ₹8,000
  • sale of marketable securities for cash
Q7 | Which of the following is not source of cash?
  • issue of shares
  • purchase of machinery
  • sale of asset
  • dividend received
Q8 | Which of the following is not application of cash?
  • increase in debtors
  • increase in inventory
  • increase in bills payable
  • increase in prepaid expenses
Q9 | If 6% Pref. share capital ₹2,00,000 were redeemed at a premium of 5%, while preparing Cash FlowStatement its effect on cash flow will be :
  • cash used from financing activities ₹2,12,000
  • cash received from financing activities ₹2,12,000
  • cash used (payment) from financial activities ₹2,10,000
  • cash used (payment) from financial activities ₹2,00,000
Q10 | If the amount of goodwill is ₹40,000 at the beginning of a year and ₹48,000 at the end of that year thenwhile preparing cash flow statement its effect on cash flow will be :
  • cash used (payment) in investing activities ₹8,000
  • cash received from operating activities ₹8,000
  • cash used (payment) from operating activities ₹8,000
  • cash used (payment) from financial activities ₹8,000
Q11 | How will you deal increase in the balance of ‘Securities Premium Reserve’ while preparing a Cash FlowStatement?
  • cash flow from operating activities
  • cash flow from investing activities
  • cash flow from financing activities
  • cash equivalent
Q12 | A Ltd., engaged in the business of retailing of two wheelers, invested ₹50,00,000 in the shares of amanufacturing company. Dividend received on this investment will be :
  • cash flow from operating activities
  • cash flow from investing activities
  • cash flow from financing activities
  • cash equivalent
Q13 | How will you treat Bank Overdraft in a Cash Flow Statement?
  • cash flow from operating activities ’
  • cash flow from investing activities
  • cash flow from financing activities
  • cash equivalent
Q14 | Where will you show purchase of Goodwill in a Cash Flow Statement?
  • cash flow from operating activities
  • cash flow from investing activities
  • cash flow from financing activities
  • cash equivalent
Q15 | How will you treat payment of ‘Interest on Debentures’ while preparing a Cash Flow Statement?
  • cash flow from operating activities
  • cash flow from investing activities
  • cash flow from financing activities
  • cash equivalent
Q16 | State whether cash deposited in bank will be classified under which kind of activity?
  • cash flow from operating activities
  • cash flow from investing activities
  • cash flow from financing activities
  • no cash flow
Q17 | A company has to prepare its balance sheet once in..
  • six months
  • two years
  • a year
  • as and when it needs
Q18 | Income statement of a business shows…
  • net profit
  • net operating result of specified period
  • net loss
  • none of these
Q19 | The statement which shows the periodical increase or decrease of funds is called___________statement.
  • funds flow
  • cash flow
  • income
  • working capital
Q20 | Fund flow statement is based on the concept of…
  • business entity
  • accounting period
  • going concern
  • all of the above
Q21 | Funds means…
  • money
  • cash
  • machinery
  • any form of financial resources
Q22 | Which of the following is the component of current assets?
  • stock
  • prepaid expenses
  • income earned but not received
  • all of the above
Q23 | The term flow of funds refers to…
  • change in funds
  • change in working capital
  • both
  • none
Q24 | Transaction between_________ may cause the flow of funds.
  • current assets and fixed assets
  • current assets and long term liabilities, and capital
  • current liabilities and fixed assets
  • all of the above
Q25 | The term current account refers to….
  • current assets
  • current liabilities
  • both
  • none