Chapter 11: Cash Flow Statement

Important Questions

1. Write the importance of cash flow statement?

2. Define the following with examples?

• Operating activities
• Investing activities
• Financing activities

3. Identify out of the following transactions that are shown as financing activities:-

• Repayment of loan taken
• Proceeds from issue of shares
• Debentures subscribed by the company
• Redemption of preference shares
• Interest paid
• Dividend paid
• Increase in bank overdraft or cash credit
• Issue of bonus shares

Sample Questions

1. Z Ltd. earned a profit of Rs. 5,00,000 after charging depreciation of Rs. 1,00,000 on assets and a transfer to general reserve of Rs. 1,50,000. Goodwill amortized was Rs. 35,000 and gain on sale of machinery was Rs. 15,000.

Additional Information: At the end of the year, Debtors showed an increase of Rs. 30,000; creditors an increase of Rs. 50,000; prepaid expenses an increase of Rs. 1,000; bills receivable a decrease of Rs. 15,000; bills payable a decrease of Rs. 20,000 and outstanding expenses a decrease of Rs. 10,000. Determine the cash flow from operating activities.

2. From the following information calculate cash flow from investing activities:

3. Explain the major Cash Inflows and outflows from investing activities.

4. Explain the major Cash Inflows and outflows from financing ac

5. For each of the following transactions, calculate the resulting cash flow and state the nature of cash flow, viz., operating, investing and financing. (a) Acquired machinery for Rs. 2,50,000 paying 20% by cheque and executing a bond for the balance payable. (b) Paid Rs. 2,50,000 to acquire shares in Informa Tech. and received a dividend of Rs. 50,000 after acquisition. (c) Sold machinery of original cost Rs. 2,00,000 with an accumulated depreciation of Rs. 1,60,000 for Rs. 60,000

MCQ

1. Which of the following is not a non-cash item?

(a) Cash Sales
(b) Goodwill written off
(c) Depreciation
(d) Provision of bad debt

2. Which of the following is not an example of cash outflow?

(a) Repayment of loans

(b) Decrease in creditors

(c) Issue of debentures

(d) None of these

3. Refund of income tax is a ______ of cash

(a) Inflow

(b) Outflow

(c) both(i) and (ii)

(d) neither of (i) and (ii)

4.

If the net profits made during the year are Rs. 50,000 and the bills receivables have decreased by Rs. 10,000 during the year then the cash flow from operating activities will be equal to Rs.

(a) Rs. 60,000

(b) Rs. 40,000

(c) Rs. 70,000

(d) Rs. 50000

Refund of income tax is the part of

(a) Operating activities in Cash Flow Statement

(b) Financing Activities in Cash Flow Statement

(c) Investing Activities in Cash Flow Statement

(d) All of the options