Accountancy M.C.Q (1 Marks)

4. Sold machinery of book value of ₹ 50,000 at a gain of ₹ 10,000.

1. Operating Activity.

3. Received ₹ 19,000 from debtors.

2. Bank deposits with 100 days of maturity.

4. Cash deposited into bank ₹ 15,000.

3. Sale of machinery of the book value of ₹ 74,000 at a loss of ₹ 9,000.

2. Three months or less.

2. An application of funds

Explanation:

Application of funds is a fund statement which shows sources and uses of the working capital and other liquid funds Hence, stock in the beginning results in an application of funds.

4. A Non-cash Operating Expenses

Explanation:

Depreciation may be described as a permanent, continuing and gradual shrinkage in the book value of fixed assets. It is based on the cost of assets consumed in a business and not on its market value.

It is a non-cash expense. It does not involve any cash outflow. It is the process of writing-off the capital expenditure already incurred.

3. Interest paid term-deposits by a bank.

3. Writing off goodwill

Explanation:

Noncash expenses are business expenses that do not require the expenditure of cash. There are four types of noncash expenses: depreciation, depletion, amortization, and deferred charges.

Noncash expenses are recorded as expenses on the income statement, but they do not have an effect on cash flow.

3. Inflow of income

Explanation:

Balance of payments surplus occurs when a country’s total exports are higher than its imports. This helps to generate capital to fund its domestic productions. With a surplus in its BoP, a country can also lend funds outside its borders.

3. A bill is accepted in payment of an open account obligation.

1. Cash flow statement

Explanation:

The statement/document that would know the cash generating activities of a company is Cash flow statement. The purpose of a cash flow statement is to provide a detailed picture of what happened to a business's cash during a specified period, known as the accounting period.

It demonstrates an organization's ability to operate in the short and long term, based on how much cash is flowing into and out of the business.

1. Statement of changes in Financial Position (working capital basis)

Explanation:

The statement of changes in financial position (sometimes called a “cash flow statement”) shows a company's net cash flow in a given period of time. Because it also indicates where the cash flowed from or to, it is often referred to as the “sources and uses of cash statement.”

4. (b) & (c) both

1. Rs. 25,000/-

2. Causes previous year's net income to be understated.

4. Contingent Liability

2. Decrease in Stock

1. Cash Flow from Operating Activities

1. Purchase of fixed asset

3. Financing activities.

4. Both A and B

1. Purchase of Fixed Assets

3. Payment of cash for purchase of machinery

1. Receipts from issurence of Equity Shares

3. Treasurer

Explanation:

The treasurer of an organization deals with the liquid assets of the firm and his responsibilities include cash management and insurance of assets.

4. Cash from business activities and changes in current assets and liabilities.

Explanation:

Cash flow from operating activities (CFO) indicates the amount of money a company brings in from its ongoing, regular business activities, such as manufacturing and selling goods or providing a service to customers.

It is the first section depicted on a company's cash flow statement. Cash flow from operating activities does not include long-term capital expenditures or investment revenue and expense.

CFO focuses only on the core business, and is also known as operating cash flow (OCF) or net cash from operating activities.

3. Issue of debentures

2. ₹ 42,000

2. The inflows and outflows of net working capital

Explanation:

Funds Flow Statement states the changes in the working capital of the business in relation to the operations in one time period.

Net working capital is the total change in the business's working capital, calculated as the total change in current assets minus the total change in current liabilities.

3. Neither Inflow nor Outflow

1. Cash flow statement appropriate

1. Operating activities.

2. Deceased Cash Inflow

1. Prior-period items

3. Either (A) or (B)

Explanation:

Flow of funds are used to track the the flow of money to and from various sectors of a national economy. It is used to track the changes in the assets and liabilities of the company. It depicts the changes in funds as well as working capital.

1. Both Direct and Indirect

4. Machinery purchased on account.

Explanation:

When a machinery is purchased, it increases the value of total assets of the business. On the other hand, if it is purchased in cash, it decreases the value of cash in the business, leaving nil effect.

However, if such machinery is purchased on credit, then an equal of liability arise for the business.

2. It reconciles ending cash balance with the balance as per bank Statement.

3. ₹ 22,000

1. Operating Activities

4. All of above

3. Reduces tax liability

Explanation:

Depreciation is a non-cash item, but to know the profitability of the organisation, it is charged to profit & loss account.

Due to charge of depreciation, organisation gets the tax benefit.

Therefore, such tax saved is considered as a cash inflow as it reduces the tax expenses by creating a charge against taxable income.

2. Profit on sale of machinery

Explanation:

Profit on sale of machinery is not added to net profit while computing the amount of funds from operations because it does not include income or expense via financing activities.

Funds from operations do not constitute gains or losses generated from non-recurring business activities like sale of land. It includes depreciation and amortisation.

1. Short-term planning

Explanation:

A cash flow statement is a statement which shows changes in the cash position of an organisation between two periods. As it consists of two periods it basically consists of short period.

Because if prepared for long period the estimation of cash values from various activities will not give accurate outcomes leading to less effective planning and decision making. Hence, it is useful for short-term planning.

3. Rs 3, 000.00

3. both (A) and (B)

Explanation:

A cash flow statement refers to a statement showing the cash inflows and outflows or the financial position of a business during different intervals of time in terms of cash and cash equivalents.

1. Cash purchase of Machinery and Plant