CA NITIN GOEL CASH FLOW STATEMENT (AS-3)

CASH FLOW STATEMENT (AS-3)

1. Which of the following are considered as financial activities in the cash flow?
a) The interest that is paid
b) The issue of preference share
c) The redemption of the preference share
d) All of the above

2. Which of the activities falls under operating activity in the cash flow statement?
a) The sales of the fixed asset
b) The interest that is paid on term deposits by a bank
c) The purchase of the own debenture
d) The issuing of equity share capital

3. Who are interested in the cash flow statements of a company?

a) The directors of the company
b) The shareholders of the company
c) The potential investors of the company
d) All of the above

4. What is the purpose of cash flow statement?

a) The future cash flows and borrowing could be predicted
b) Different companies can be easily compared with each other
c) Provide formation regarding a company’s solvency, liquidity, and financial stability
d) All of the above

5. Which of the following activities is investing activity in cash flow?

a) Sale of investment by non-financial enterprise
b) Issuing a debenture
c) Paying back a loan
d) The raw material purchased with cash

6. Nora Ltd., arrived at a net profit of ₹ 5,00,000 for the year ended March 31, 2023.
Depreciation for the year was ₹ 2,00,000. There was a profit of ₹ 50,000 on assets sold
which was transferred to Statement of Profit and Loss account. Trade Receivables
increased during the year ₹ 40,000 and Trade Payables also increased by ₹ 60,000.
Compute the cash flow from operating activities by indirect method.
a) ₹ 5,50,000
b) ₹ 5,60,000
c) ₹ 6,70,000
d) ₹ 6,60,000

7. 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 ____.
a) Operating activities, financing activities
b) Financing activities, investing activities
c) Investing activities, operating activities
d) None of the above

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8. The aggregate cash flows arising from acquisitions and disposals of subsidiaries or other
business units should be presented separately and classified as which activities.
a) Operating activities
b) Investing activities
c) Financing activities
d) None of the above

9. Which are examples of non-cash transactions are:

a) the acquisition of assets by assuming directly related liabilities
b) the buyback of shares from open market
c) the acquisition of an enterprise by means of payment through demand draft.
d) the redemption of debentures

10. How to report the effect of changes in exchange rates on cash and cash equivalents held
in a foreign currency?
a) Should be reported as a separate notes after financial statements
b) Should be reported as part of the reconciliation of the changes in cash and cash
equivalents during the period
c) Should not be reported anywhere
d) Should be reported by CA in special report.

11. Where to show dividends received and dividends paid in cash flow statement.
a) Investing activities; financing activities
b) Financing activities; operating activities
c) Investing activities; operating activities
d) Financing activities; investing activities

12. What will be the cash paid to suppliers and employees if opening and closing inventory is
₹ 1,950 and ₹ 900 respectively. Cost of goods sold is ₹ 26,000 and opening and closing
sundry creditors is ₹ 1,890 and ₹ 150 respectively. Also given that administrative and
selling expenses were ₹ 910.
a) ₹ 27,690
b) ₹ 27,650
c) ₹ 27,600
d) ₹ 27,620

13. XYZ Ltd. has interest payable at beginning and end of the year for ₹ 100 and ₹ 230
respectively. Company has incurred ₹ 400 as interest expenses for the year. Help Mr A in
calculation of Interest paid during the year 2023.
a) ₹ 270
b) ₹ 260
c) ₹ 250
d) ₹ 240

14. ……………………………………… are short term, highly liquid investments that are readily convertible
into known amounts of cash and which are subject to an insignificant risk of changes in
value.
a) Cash
b) Bank
c) Cash equivalents
d) None of the above

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15. …………………………………. are the principal revenue-producing activities of the enterprise and
other activities that are not investing or financing activities.
a) Investing activities
b) Operating activities
c) Financing activities
d) None of above

16. Examples of cash flows from operating activities are:

(i) cash receipts and cash payments of an insurance enterprise for premiums and claims,
annuities and other policy benefits
(ii) cash payments or refunds of income taxes unless they can be specifically identified
with financing and investing activities; and
(iii) cash receipts and payments relating to futures contracts, forward contracts, option
contracts and swap contracts when the contracts are held for dealing or trading
purposes.

a) Only 1 and 2
b) Only 1 and 3
c) Only 3 and 2
d) Only 1,2 and 3

17. A Ltd is a company engaged in sale & purchase of shares. It holds securities and loan for
dealing purpose. Where will be cash arise from such activities to be shown in cash flow?
a) Investing activities
b) Operating activities
c) Financing activities
d) None of above

18. Cash flows arising from capitalised research and development costs and self-constructed
fixed assets are part of……………………………
a) Investing activities
b) Operating activities
c) Financing activities
d) None of above

19. An amount of ₹ 3 Lacs was raised from the issue of share capital and a further ₹ 2.5 Lacs
was raised from long term borrowings. How to show amount in cash flow statement of
MN Ltd?
a) Cash flow from Investing activities
b) Cash flow from Operating activities
c) Cash flow from Financing activities
d) None of above

20. A non-trading company pays ₹4,00,000 to acquire shares in Ranbir Ltd. and receive ₹
40,000 as dividend after Acquisition. In the Cash flow statement, these transactions will
result in:
a) Cash used in Investing Activities ₹ 3,60,000
b) Cash generated from Investing Activities ₹ 3,60,000
c) Cash used in Investing activities ₹ 4,00,000 & Cash flow from Financing activities ₹
40,000
d) Cash generated from Financing Activities ₹ 4,00,000

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21. M/s Anmol & Sons; A Bamboo pens producing company, purchased machinery for
₹9,00,000. It received a dividend of ₹70,000 on investment in shares. The company also
sold an old machine with the book value of ₹79,000 at a loss of ₹10,000 Compute the
amount of Cash flow/used from/in Investing Activities.
a) 7,41,000
b) 7,61,000
c) 8,81,000
d) 8,31,000

22. If Net profit is ₹ 35,000 after writing of goodwill ₹ 6,000 & Loss on sale of furniture ₹ 1,000,
Cashflow from operating Activities will be:
a) ₹ 35,000
b) ₹ 42,000
c) ₹ 29,000
d) ₹ 28,000

23. From the following data, find the value of building sold during the year:
Particulars 31.3.2023 31.3.2024
Land & building 2,00,000 1,70,000
Capital reserve Nil 20,000
A piece of land has been sold during the year and the profit on sale has been credited to
capital reserve. Depreciation charged on the building during the year is ₹ 5,000; no
additions have been made under this head during the year.
a) ₹ 30,000
b) ₹ 50,000
c) ₹ 40,000
d) ₹ 45,000

24. In an organization, provision for taxation as of 31st December 2023 was ₹ 16,000, and on
31st December 2024 ₹ 18,000. Provision for taxation of ₹ 19,000 was made during the year
2024. The tax paid during the year is –
a) ₹ 17,000
b) ₹ 19,000
c) ₹ 2,000
d) ₹ 16,000

25. Some of the account balances of KK Ltd. are as follows in its balance sheet:
2023 (₹) 2024 (₹)
Share Capital 2,50,000 4,50,000
10% Debentures 2,00,000 1,50,000
Share Premium 25,000 50,000
If interest paid on debentures was 20,000, the net cash flows from financing activities were:
a) ₹ 1,75,000
b) ₹ 1,55,000
c) ₹ 2,05,000
d) ₹ 2,25,000

26. Investments at the beginning and at the end of the year 2023-24 were ₹ 255 Lakh and ₹
210 Lakh respectively. During the year 40 percent of original investments were sold at a
profit of ₹63 Lakh. Amount of cash inflow & outflow respectively from Investments will be:

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a) ₹ 102 Lakh and ₹ 57 Lakh

b) ₹ 165 Lakh and ₹ 57 Lakh
c) ₹ 45 Lakh and Nil
d) ₹ 147 Lakh and ₹ 39 Lakh

27. The following information of a non-financial enterprise is given:

(i) Purchase of fixed assets ₹ 40,000;
(ii) Proceeds from the sale of equipment ₹ 35,000;
(iii) Interest received ₹ 3,000;
(iv) Interest paid ₹ 6,000,
(v) Dividend received ₹ 4,000 and
(vi) Dividend paid ₹ 15,000.
Amount of cash from investing activities will be –
a) ₹ 1,000
b) ₹ (4,000)
c) ₹ 2,000
d) ₹ (2,000)

28. QPR Ltd. has the following balances:

Investment at the end of the year 2017-2018 ₹ 85,000, Investment at the end of the year
2018-2019 ₹ 70,000. During the year the company had sold 40% of its original investment
at a profit of 50%. What will be the amount of cash inflow and cash outflow from the
investment:
a) ₹ 51,000 and ₹ 36,000
b) ₹ 51,000 and ₹ 19,000
c) ₹ 1,21,000 and ₹ 85,000
d) ₹ 1,21,000 and ₹ 19,000

29. Crown Ltd. wants to prepare its cash flow statement. It sold equipment of book value of ₹
60,000 at a gain of ₹ 8,000. The amount to be reported in its cash flow statement under
operating activities is
a) Nil
b) ₹ 8,000
c) ₹ 68,000
d) ₹ 60,000

30. While preparing cash flows statement, an entity (other than a financial institution) should
disclose the dividends received from its investment in sharesas
a) operating cash inflow
b) investing cash inflow
c) financing cash inflow
d) cash & cash equivalent

31. XYZ Co. is a financial enterprise. In its cash flow statement, interest paid and dividends
received should be
a) classified as operating cash flows.
b) classified as financing cash flows.
c) Not shown in cash flow statement.
d) classified as investing cash flows.

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32. In the cash flow statement, ‘cash and cash equivalents’ do not include,
a) Bank balances.
b) Short-term investments readily convertible into Cash are subject to an insignificant
risk of changes in value.
c) Cash balances.
d) Loan from bank.

33. While preparing a Cash Flow Statement using the Indirect method as required under AS
3, which of the following will not be deducted from/added to the Net Profit to arrive at
the “Cash flow from Operating activities”?
a) Interest income
b) Gain on sale of a fixed asset.
c) Depreciation.
d) Gain on sale of inventory

34. While preparing cash flow statement, conversion of debt to equity

a) Should be shown as a financing activity.
b) Should be shown as an investing activity.
c) Should not be shown as it is a non-cash transaction
d) Should not be shown as operating activity.

35. Which of the following would be considered a ‘cash-flow item from an “investing"
activity’?
a) Cash outflow to the government for payment of taxes.
b) Cash outflow to purchase bonds issued by another company.
c) Cash outflow to shareholders as dividends
d) Cash outflow to make payment to trade payables.

36. All of the following would be included in a company’s operating activities except:
a) Income tax payments
b) Collections from customers or Cash payments to suppliers
c) Dividend payments
d) Office and selling expenses.

37. Hari Uttam, a stock broking firm, received ₹ 1,50,000 as premium for forward contracts
entered for purchase of equity shares. How will you classify this amount in the cash flow
statement of the firm?
a) Operating Activities.
b) Investing Activities.
c) Financing Activities.
d) Non-cash transaction.

38. As per AS 3 on Cash Flow Statements, cash received by a manufacturing company from
sale of shares of ABC Company Ltd. should be classified as
a) Operating activity.
b) Financing activity.
c) Investing activity.
d) Non-cash transaction

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Answers:
1. (d)
2. (b)
3. (d)
4. (d)
5. (a)
6. (c)
Explanation:
Cash Flow Statement
Particulars Amount ₹
Net Profit at the end of the year 5,00,000
Adjustment for Non-Cash and Non-Operating items:
+ Depreciation for the year 2,00,000
– Profit on Sale of Assets (50,000) (150,000)
Operating Profit before Working Capital changes 6,50,000
– Increase in Trade Receivables (40,000)
+ Decrease in Trade Payables 60,000 20,000
Cash Flow from Operating Activities 6,70,000

7. (b)
8. (b)
9. (a)
10. (b)
11. (a)
12. (c)
Explanation:
Particulars Amount ₹
Cost of sales 26,000
Administrative and selling expenses 910
26,910
Add: Sundry creditors at the beginning of the year 1,890
Inventories at the end of the year 900 2,790
29,700
Less: Sundry creditors at the end of the year 150
Inventories at the beginning of the year 1,950 2,100
Cash paid to suppliers and employees 27,600

13. (a)
14. (c)
15. (b)
16. (d)
17. (b)
18. (a)
19. (c)
20. (a)
21. (b)
22. (b)

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23. (d)
24. (a)
25. (b)
26. (b)
27. (c)
28. (b)
29. (a)
30. (b)
31. (a)
32. (d)
33. (d)
34. (c)
35. (b)
36. (c)
37. (a)
38. (c)

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