Cash Flow Statement quiz

A Cash Flow Statement is prepared according to:

For a non-financial company, dividend paid is classified as:

Which of the following is a cash equivalent?

Depreciation is added back to net profit while calculating operating cash flows because it is:

Interest received by a bank (a financial enterprise) is classified as:

An increase in trade payables during the year is:

Purchase of machinery in exchange for equity shares is:

Profit on sale of a fixed asset is:

Proceeds from the issue of debentures are a cash inflow from:

If operating profit before working capital changes is Rs 1,50,000 and inventories increase by Rs 20,000, cash generated from operations (ignoring other items) is:

Why is a Cash Flow Statement useful to a short-term creditor? (2 marks)

Give two examples of cash outflows from investing activities. (2 marks)

Why is income tax paid generally shown under operating activities? (2 marks)

Why is the purchase of a trade investment of Rs 50,000 maturing in 30 days not shown as an investing outflow? (2 marks)

State the treatment of interest paid on debentures in the Cash Flow Statement of a manufacturing company. (2 marks)

What are non-cash transactions? Give one example. (2 marks)

Distinguish between the direct method and the indirect method of computing operating cash flows. (2 marks)

Give two examples of extraordinary items and state where the cash flows from them are shown. (2 marks)

How is a decrease in prepaid expenses treated while computing cash from operating activities? Give a reason. (2 marks)

State whether the following lead to inflow, outflow or no flow of cash: (i) conversion of debentures into equity shares (ii) cash withdrawn from bank. (2 marks)

Calculate cash flows from operating activities: net profit before tax Rs 1,20,000; depreciation Rs 25,000; goodwill written off Rs 10,000; profit on sale of land Rs 15,000; decrease in trade receivables Rs 12,000; increase in inventories Rs 18,000; decrease in trade payables Rs 9,000; tax paid Rs 30,000. (3 marks)

Investments were Rs 2,00,000 at the beginning and Rs 2,60,000 at the end. During the year, investments costing Rs 50,000 were sold at a profit of Rs 8,000. Calculate the investments purchased and the net cash flow from investing activities relating to investments. (3 marks)

Plant and machinery (gross) was Rs 8,00,000 at the beginning and Rs 9,50,000 at the end. Accumulated depreciation was Rs 2,00,000 and Rs 2,40,000. Machinery costing Rs 60,000 with accumulated depreciation of Rs 25,000 was sold for Rs 30,000. Calculate depreciation charged, the loss on sale and the machinery purchased. (3 marks)

10% debentures were Rs 4,00,000 at the beginning and Rs 2,00,000 at the end of the year. Debentures of Rs 2,00,000 were redeemed at a premium of 5% on 31 March, the last day of the year. Calculate the interest paid and the cash outflow from financing activities for debentures. (3 marks)

Opening cash and cash equivalents are Rs 50,000. Net cash from operating activities is Rs 1,60,000, net cash used in investing activities is Rs 2,10,000 and net cash from financing activities is Rs 80,000. Calculate the net change in cash and the closing cash and cash equivalents. (3 marks)

Read the passage and answer the questions. Arjun Textiles Ltd is a manufacturing company. During 2025-26 it received dividend of Rs 20,000 on shares held as investment, paid interest of Rs 45,000 on a term loan, received interest of Rs 12,000 on fixed deposits, and paid an interim dividend of Rs 60,000 to its shareholders. (i) Classify each of the four items under the correct activity. (ii) How would the classification of dividend received change if Arjun Textiles were a mutual fund company? (iii) Explain the reason for the special rule on interest and dividends. (5 marks)

Read the passage and answer the questions. The accountant of Rhea Ltd found that the surplus in the Statement of Profit and Loss rose from Rs 2,00,000 to Rs 3,50,000. During the year an interim dividend of Rs 40,000 was paid, Rs 50,000 was transferred to General Reserve and provision for tax of Rs 70,000 was made. (i) Calculate net profit before tax and extraordinary items. (ii) Why is transfer to reserve added back? (iii) Under which activity will the interim dividend appear? (5 marks)

Read the passage and answer the questions. Indus Ltd sold an old machine with a book value of Rs 80,000 for Rs 65,000, purchased new machinery for Rs 3,00,000, bought a patent for Rs 50,000 and sold long-term investments costing Rs 1,00,000 for Rs 1,20,000. (i) Calculate the cash flow from investing activities. (ii) How will the loss on sale of machine and profit on sale of investments be treated in operating activities? (iii) Is the net investing cash flow an inflow or outflow? Is this a healthy sign for a growing company? (5 marks)

Read the passage and answer the questions. Bharat Ltd raised Rs 5,00,000 by issuing equity shares at par, redeemed preference shares of Rs 2,00,000 at a premium of 10%, repaid a long-term loan of Rs 1,00,000, paid interest of Rs 15,000 on the loan and paid final dividend of Rs 50,000. (i) Calculate cash flow from financing activities. (ii) Why is the premium paid on redemption shown under financing activities? (iii) Name one financing transaction that would not appear in the Cash Flow Statement. (5 marks)

Read the passage and answer the questions. A startup reported operating profit before working capital changes of Rs 4,00,000. During the year its trade receivables rose by Rs 2,50,000, inventories rose by Rs 1,00,000 and trade payables rose by Rs 30,000. Tax paid was Rs 40,000. (i) Calculate cash generated from operations. (ii) Calculate net cash from operating activities. (iii) What warning does this give the founders despite the profit? (5 marks)

Explain the classification of cash flows into operating, investing and financing activities as per AS 3 (Revised), giving three examples of inflows and outflows under each. Draw a chart summarising the classification. (6 marks)

Prepare a Cash Flow Statement from the following: surplus in Statement of Profit and Loss rose by Rs 90,000; provision for tax made Rs 30,000; depreciation Rs 40,000; trade receivables increased by Rs 25,000; inventories decreased by Rs 15,000; trade payables increased by Rs 10,000; tax paid Rs 25,000; machinery purchased Rs 1,60,000; equity shares issued Rs 1,00,000; dividend paid during the year out of the surplus Rs 20,000; opening cash Rs 30,000. Present it in prose line form and verify the closing cash balance. (6 marks)

Explain the steps in calculating cash flows from operating activities by the indirect method. Draw a flowchart showing the adjustments for non-cash items, non-operating items and working capital changes, with two examples of each. (6 marks)

Explain, with working notes, how to calculate the purchase of fixed assets when book values, depreciation and sale of assets are given. Illustrate with your own figures for a Machinery Account and draw a labelled sketch of the Machinery Account in prose ledger form. (6 marks)

Discuss the objectives, uses and limitations of the Cash Flow Statement. Draw a chart comparing the Cash Flow Statement with the Statement of Profit and Loss on four bases. (6 marks)