Refer to MCQs for Accountancy Class 12 with Answers Chapter 6 Cash Flow Statement designed as per the latest syllabus issued by CBSE. All Multiple choice questions have been provided with solutions and have been prepared based on the expected pattern in upcoming board exams

Question: Sale of Copyrights is concerned with_______
a) Investing Activities
b) Operating Activities
c) Both Operating Activities and Financing Activities
d) Financing Activities

Question: The most important objective of cash flow statement is that helps to ascertain the and outflows of cash and from
a) All of the options
b) Gross inflows
c) Outflows of cash
d) Cash equivalents

Question. Dividend received by other than financial enterprise is shown in cash flow statement under
(a) Operating activity
(b) Financing activity
(c) Investing activity
(d) None of the above 

Question: Under Cash Flow from Operating Activities incorporates are
a) All of the options
b) Cash received from customers
c) Paid to suppliers
d) Paid for operating costs

Question: Net Profit for the year Rs. 15000 , Interest Received in advance on 1st Jan 2004 Rs. 2000 and 31st December 2004 Rs. 3000, Cash from operation will be
a) Rs. 16000
b) Rs. 22000
c) Rs, 13000
d) Rs. 15000

Question. Dividend received by financing enterprise is shown in cash flow statement under
(a) Operating activity
(b) Financing activity
(c) Investing activity
(d) None of the above 

Question: Increase in the amount of bills receivable results in
a) Decrease in cash
b) Increase in cash
c) No change in cash
d) All of the options

Question. An example of cash flow from investing activity is :
(A) Issue of debenture
(B) Repayment of long-term loan
(C) Purchase of raw materials for cash
(D) Sale of investment by non-financial enterprise.

Question. Which of the following transactions will result into ‘Flow of Cash’ ? 
(a) Deposited ₹10,000 into bank.
(b) Withdrew cash from bank ₹14,500.
(c) Sale of machinery of the book value of ₹74,000 at a loss of ₹9,000.
(d) Converted ₹2,00,000 9% debentures into equity shares.

Question. Which of the following item is considered as Cash Equivalents?
(A) Marketable Securities
(B) Debtors
(C) Investment
(D) Bills of Exchange

Question. GSC Ltd. purchased machinery of Rs. 10,00,000 issuing a cheque of Rs. 2,50,000 and 10% Debentures of Rs. 7,50,000. ln the Cash Flow Statement, the transaction will be shown as
(a) Outflow under Investing Activity Rs. 10,00,000, inflow under Financing Activity as Receipt for Debentures Rs. 7,50,000.
(b) Outflow under investing Activity Rs. 2,50,000.
(c) Inflow of Rs. 7,50,000 as Financing Activity.
(d) None of the above.

Question: AS-3 (revised ) deals with statement of changes in financial position on __
a) Cash Basis
b) Non Cash Basis
c) On Accrual Basis
d) All of the options

Question. Cash Flow Statement is based upon
(a) Accrual basis of accounting
(b) Cash basis of accounting
(c) Accounting equation
(d) None of these 

Question: Redemption of Preference shares comes under
a) Cash Flow from Financing Activities
b) Cash Flow from Operating Activities
c) Cash Flow from Investing Activities
d) All of the options

Question: Which of the following is not a source of finance
a) Fixed Assets
b) Debentures
c) Bank Overdraft
d) Bank Loan

Question. Payment of income tax is classified under
(a) Operating activity
(b) Financing activity
(c) Investing activity
(d) None of the above

Question: Which items will be added in operating activities
a) All of the options
b) Decrease in stock
c) Increase in creditors
d) Increase in outstanding expenses

Question: Mention the net amount of sourceof cash when a fixed asset (having book value of Rs. 15,000) is sold at a loss of Rs. 5,000.
a) Rs. 20000
b) Rs. 15000
c) Rs. 10000
d) Rs. 30000

Question: Cash Credit is concerned with __
a) Financing Activities
b) Investing Activities
c) Operating Activities
d) Cash and Cash Equivalents

Question. Which of the following transactions will not result into flow of cash ? 
(a) Issue of equity shares of ₹1,00,000.
(b) Purchase of machinery of ₹1,75,000.
(c) Redemption of 9% debentures ₹3,50,000.
(d) Cash deposited into bank ₹15,000.

Question. s. Cash flow statement is prepared for financial planning of ………………
(A) Long range
(B) Medium range
(C) Short range
(D) Very Long range

Question. Interest paid by an investment company will come under which kind of activity while preparing cash flow statement?
(A) Cash Flow from Operating Activities
(B) Cash Flow from Investing Activities
(C) Cash Flow from Financing Activities
(D) No Cash Flow

Question: Cash flow arises when the net effect of a transaction _ the amount of cash or cash equivalents
a) Either increase or decrease
b) Only Increase
c) Only decrease
d) All of the options

Question: Operating activities is mainly concerned with____________
a) All of the options
b) Long term liabilities and stockholders equity
c) Long term assets
d) Current assets and current liabilities

Question: Short term highly liquid investments which are readily convertible into known amount of cash and which are subject to an insignificant risk of change in the value are called _
a) Cash at Bank
b) Cash Equivalents
c) Non-current Assets
d) Intangible Assets

Question: Limitations of Cash Flow Statementv are
a) All of the options
b) Cash flow statement does not consider non-cash item
c) Cash flow statement cannot replace fund flow statement or income statement
d) It cannot be used for the purpose of comparison over a period of time

Question: Cash Outflows from investing activities are
a) Cash payments to acquire shares, warrants
b) Cash payments to acquire fixed assets
c) All of the options
d) Cash payments to acquire shares, warrants

Question. Dividend paid by a Trading company is classified under which kind of activity while preparing cash flow statement?
(A) Cash Flow from Operating Activities
(B) Cash Flow from Investing Activities
(C) Cash Flow from Financing Activities
(D) No Cash Flow

Question. Dividend paid by a financial company is shown as cash outflow under
(a) Operating Activities.
(b) investing Activities.
(c) Financing Activities.
(d) Cash and Cash Equivalent.

Question: Principal revenue generating activities of an enterprise are called as
a) Operating activities
b) Financing activities
c) Investing activities
d) All of the options

Question: The exchange or conversion of long-term bonds into common stock.
a) Supplemental Activity
b) Operating Activity
c) Investing Activity
d) Financing Activity

Question: A decrease in the balance of Accounts Receivable.
a) Operating Activity
b) Investing Activity
c) Financing Activity
d) Supplemental Activity

Question: A company who issues bonds or stocks in result raised funds which finally
a) Increases cash
b) Decreased cash
c) Increased liabilities
d) Increased equity

Question: Proceeds from the sale of equipment used in the business.
a) Investing Activity
b) Operating Activity
c) Financing Activity
d) Supplemental Activity

Question: A financial statement that shows the inflows and outflows of cash during a particular period of time is known as
a) Balance sheet
b) Income statement
c) Statement of retained earnings
d) Statement of cash flows

Question: For the calculation of cash flow from operating activities, payments and receipts shown in Profit & Loss account are converted into payments and receipts actually in cash by eliminating
a) Non-cash revenue from the revenue earned and Non-cash expenses from expenses incurred
b) Non-cash revenue from the revenue earned
c) Non-cash expenses from expenses incurred
d) None of the options

Question: Financing activities brings changes in
a) Size and composition of owners equities and Borrowing of the enterprise
b) Size and composition of owners equities
c) Borrowing of the enterprise
d) None of the options

Question: For the calculation of cash flow from operating activities, payments and receipts shown in Profit & Loss account are converted into payments and receipts actually in cash by eliminating
a) Non-cash revenue from the revenue earned and Non-cash expenses from expenses incurred
b) Non-cash revenue from the revenue earned
c) Non-cash expenses from expenses incurred
d) None of the options

Question: Given salary expenses Rs 40,000, Outstanding in the beginning of the year: Rs 5,000 and outstanding at the end of the year Rs 10,000. Cash outflow on salary will be
a) Rs. 55000
b) Rs. 45,000
c) Rs. 35,000
d) Rs. 15,000

Question. Cash from Operating activities will decrease due to :
(A) Increase in Current Assets
(B) Decrease in Current Liabilities
(C) Neither of the two
(D) Both A and B above

Question: ABC Ltd had investment of Rs 68,000 as on 31.3.2013 and investment of Rs 56,000 as on 31.3.2014. During the year ABC Ltd sold 40% of its investments being held in the beginning of period at a profit of Rs 16,800. Determine cash flow from investing activities.
a) Rs. 72,800
b) Rs. 59,200
c) Rs. 28,800
d) All of the options

Question: While preparing Cash Flow Statement, non-cash items and non-operating items are not required to be adjusted under________
a) Direct method
b) Indirect method
c) Average method
d) All of the options

Question. Payment of income Tax is shown as
(a) Operating Activities.
(b) investing Activities.
(c) Financing Activities.
(d) General Activities.

Question. If the amount of goodwill is Rs.40,000 at the beginning of a year and Rs.48,000 at the end of that year then while preparing cash flow statement its effect on cash flow will be :
(A) Cash used (Payment) in Investing Activities Rs. 8,000
(B) Cash received from operating activities Rs. 8,000
(C) Cash used (Payment) from Operating Activities Rs. 8,000
(D) Cash used (Payment) from Financial Activities Rs.8,000

Which of the following is source of cash?
(A) Cash deposited into Bank
(B) Cash withdrawn from Bank
(C) Sale of Goods costing ₹10,000 for ₹8,000
(D) Sale of marketable securities for cash

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) It explains the deviation of cash from Earnings.

An example of Cash Flows from Financing Activity is :
(A) Credit Revenue from Operations
(B) Cash receipts from issue of shares
(C) Sale of Investments
(D) Interest Received

Interest received by a finance company is classified under which kind of activity while preparing a Cash flow statement?
(A) Cash Flow from Operating Activities
(B) Cash Flow from Investing Activities
(C) Cash Flow from Financing Activities
(D) No Cash Flow

Question. Interest received and paid is considered as which type of activity by a finance company while preparing a Cash Flow Statement?

Question. An increase in accrued income during the particular year is _______ the net profit (added to/deducted from). 

Question. If the net profits earned during the year is ₹50,000 and the amount of debtors in the beginning and the end of the year is ₹10,000 and ₹20,000 respectively, then the cash from operating activities will be equal to ₹ _______(₹ 40,000/₹60,000) 

Question. Give any one example of an activity, which is an investing activity for every type of enterprise.

Question. For calculating cash flow from operating activities,provision for doubtful debts is _______ the profit made during the year (added to/deducted from).

Question. Goodwill amortised is _______ the profit made during the year for calculating the cash flow from operating activities (added to/deducted from).

Question. If the net profits made during the year are ₹50,000 and the bills receivables have decreased by ₹10,000 during the year then the cash flow from operating activities will be equal to `_______
(40,000/₹ 60,000) 

Question. Under which type of activity will you classify ‘Rent received’ while preparing cash flow Statement? 

Question. Expenses paid in advance at the end of the year are _______ the profit made during the year (added to/deducted from). 

Question. ‘Loans and advances granted’ by a company will be considered, as which type of Activity while preparing Cash Flow Statement.

We hope the above multiple choice questions for Class 12 Accountancy for Chapter 1 Cash Flow Statement provided above with answers based on the latest syllabus and examination guidelines issued by CBSE, NCERT and KVS are really useful for you. Cash Flow Statement is an important chapter in Class 12 as it provides very strong understanding about this topic. Students should go through the answers provided for the MCQs after they have themselves solved the questions. All MCQs have been provided with four options for the students to solve. These questions are really useful for benefit of class 12 commerce students. Please go though these and let us know if you have any feedback in the comments section.