Cash Flow Statement MCQ Question Answer

Question 1

The statement which show the cash situation is called:

A.Cash flow statement

B.Income statement

C.Balance sheet

D.None of these

SOLUTION

Solution : A

The statement which show the cash situation is called cash flow statement.

Question 2

A financial statement that shows the inflows and outflows of cash during a particular period of time is known as:

A.Income Statement

B.Statement of Retained Earnings

C.Balance Sheet

D.Statement of Cash Flows

SOLUTION

Solution : D

A financial statement that shows the inflows and outflows of cash during a particular period of time is known as statement of cash flows.

Question 3

Increase in current liabilities like accounts payable, accrued liabilities, income tax payable etc. are _________ under indirect method.

A.Not treated

B.Added

C.Subtracted

D.None of these

SOLUTION

Solution : B

Increase in current liabilities like accounts payable, accrued liabilities, income tax payable etc. are added under indirect method.

Question 4

It’s one of the purest measures of cash sources and uses.

A.Operating Activities

B.Investing Activities

C.Financing Activities

D.None of these

SOLUTION

Solution : A

Operating Activities is one of the purest measures of cash sources and uses.

Question 5

Purchase of machinery by means of issue of shares should be ___ from cash flow statement

A.Included

B.Excluded

C.Subtracted

D.None of these

SOLUTION

Solution : B

Purchase of machinery by means of issue of shares should be excluded from cash flow statement as it doesnot involve cash.

Question 6

Which of the following is incorrect about the statement of cash flows?

A.It provides information about the cash receipt and cash payments of an enterprise.

B.It reconciles ending cash balance with the balance as per bank statement.

C.It provides information about the operating, investing and financing activities

D.None of these

SOLUTION

Solution : B

It reconciles ending cash balance with the balance as per bank statement is incorrect about the statement of cash flows

Question 7

Short term highly liquid investments that are readily convertible in to known amounts of cash and which are subject to insignificant risk of changes in value is known as ___

A.Cash at bank

B.Investment in shares

C.Cash equivalents

D.None of these

SOLUTION

Solution : C

Short term highly liquid investments that are readily convertible in to known amounts of cash and which are subject to insignificant risk of changes in value is known as cash equivalents

Question 8

Receipt of interest is to be _________ from net profit.

A.added

B.deducted

C.not to be treated

D.none of these

SOLUTION

Solution : B

Receipt of interest is to be deducted from net profit.

Question 9

Under indirect method of preparing statement of cash flows, depreciation expense affects:

A.Operating activities

B.Investing activities

C.Financing activities

D.None of these

SOLUTION

Solution : A

Under indirect method of preparing statement of cash flows, depreciation expense affects operating activities.

Question 10

In particular, which cash flow can uncover a company’s true profitability?

A.Operating

B.Investing

C.Financing

D.None of these

SOLUTION

Solution : A

In particular, operating cash flow can uncover a company’s true profitability