Monday, May 16, 2011

CS507 MIDTERM (15-05-2011)

Question No: 1 ( Marks: 1 ) - Please choose one The term information architecture describes a specialized ---------------- which relates to the management of information and employment of informational tools.
Skill Set
Data Set
Tool Set
Question No: 2 ( Marks: 1 ) - Please choose one ƒnDevaluation of currency is called ________
Interest rate 
Inflation
Markup
Question No: 3 ( Marks: 1 ) - Please choose one
 The system used to record the transactions of routine and repetitive nature is called as _________ .
. Support system
. Decision support system
. Transaction control system
Question No: 4 ( Marks: 1 ) - Please choose one ƒn ---------------- helps in getting the right material and physical resources together at the right place and at the right time to meet the customer's requirements.
BRP
MRP
CRP
Question No: 5 ( Marks: 1 ) - Please choose one
Which of the following model combines the elements of the waterfall model with the philosophy of prototyping?
Iterative
Incremental
Raid
Question No: 6 ( Marks: 1 ) - Please choose one An information system that automatically generates report on regular basis and are not used to monitor input or activities called
_ Open loop system
_ Closed loop system
_ Closed end System
Question No: 7 ( Marks: 1 ) - Please choose one Which of the following is one of the ¡§Types of Problem¡¨?
Structured
Unstructured
Semi-Structured
ALL of the given options
Question No: 8 ( Marks: 1 ) - Please choose one ƒnThey represent Equations / Formulae representing relationship between two or more factors related to each other in a defined manner is called-------
Graphical Model
Mathematical Model
Algebra Model
Question No: 9 ( Marks: 1 ) - Please choose one The study of business problem domain used to recommend improvements and specify the business Requirements for the solution is called:
. System Analysis
. System Design
. Risk Management
. Risk Analysis
Question No: 10 ( Marks: 1 ) - Please choose one Decision making is the cognitive process of selecting a course of action from among multiple alternatives
True
False
Question No: 11 ( Marks: 1 ) - Please choose one Targeting advertising to customers to -------------- the probability, that an offer is accepted.
. Decrease
. Increase
. Stable
Question No: 12 ( Marks: 1 ) - Please choose one Management is concerned with the day to day costs, production targets in ____
Service sector
Manufacturing Sector
Trading sector
Question No: 13 ( Marks: 1 ) - Please choose one Which of the following are the examples of Primary sources?
. Commentaries, review articles and literature reviews
. Directories, Guidebooks, manuals, Chronologies
. Interviews, surveys and fieldwork
. None of the
Question No: 14 ( Marks: 1 ) - Please choose one Which of the following is a method of software/ Information System development where the model is designed, implemented and tested incrementally until the product is finished?
Incremental Model
Waterfall Model
Iterative Model
RAID
Question No: 15 ( Marks: 1 ) - Please choose one
System design can be explained and presented in -------------------- form.
. Mathematical
. Explanatory
. Flow
. Narrative
Question No: 16 ( Marks: 1 ) - Please choose one
Which of the following sources are original materials on which other research is based?
. Primary
. Secondary
. Tertiary
. None of these
Question No: 17 ( Marks: 1 ) What is milestone of Waterfall model ? Marks:2
Question No: 18 ( Marks:
What is typical information system that a decision support system gathers and discuss?
Question No: 19 ( Marks: 2 ) Enlist the types of models used in DSS.
Question No: 20 ( Marks: 3 )
What do you understand by TQM? Identify tools that can be used to promote and implement TQM?(
Question No: 21 ( Marks: 3)
What would be the document of software project which is developed under the procedural development phase?
Question No: 22 ( Marks: 5 ) A newly created organization will face unstructured problems. Why or why not. Justify?
Question No: 23 ( Marks: 5) ƒn
Evaluate prototyping in term of benefits and risk. Also explain why prototypes are used

Fin621 Midterm Objective Questions

Q1. Differentiate between closing entries and adjusting entries. (3)

Q2. Why wrong inventory valuation effects two periods? Explain (3)

Q3. Is it necessary to review every cash transaction by its receipt? (3)

Q4. Explain how the adoptions of FIFO method rather than LIFO will tend to
raise or lower the quality of a company’s earnings? Assume the continuance of the
inflation. (5)

Q5. Patterson Company reported net income for the current year of Rs. 666,000.
During the year the company’s accounts receivable increased by Rs. 50,000,
inventory decreased by Rs. 23,000, accounts payable decreased by Rs. 55,000, pre-
paid expenses increased by Rs. 35,000, and accrued expenses payable increased
by Rs. 14,000. Determine the amount of cash provided by or used for operating
activities by the indirect method. (5)

Sunday, May 15, 2011

FIN621 - Solved MCQs (Lecture 1 to Lecture16) Financial Statement Analysis


How many basic types of adjusting entries are there?
Select correct option:
Two types
Three types
Four types
Ten types

Which of the following is not true about the “Account”?
Select correct option:
Accounts are only prepared by the business entities
Account always reflects the amount of the single transaction only
Account is effected both by economic and non economic events
All of the given options

Which of the following is NOT one of the three items required to be shown in the
heading of a financial statement?
Select correct option:
The preparation date of the financial statement
The title of the financial statement
The unit of measure in the financial statement
The name of the business entity

End product of the accounting cycle is known as the__________
Select correct option:
Tax return
Financial statements
Auditor’s annual report
Annual general meeting
Which of the following is TRUE about both sides of the trial balance?
Select correct option:

Both sides are always positive
Both sides are negative
Both sides are equal
Both sides are not linked which each other

How would an increase in owner’s equity be recorded?
Select correct option:
Debit
Credit
No effect
Statement is wrong


Which of the following account would NOT be closed to the income summary account at
the end of a period?
Select correct option:
Rent expense
Revenue earned
Wages expense
Accumulated depreciation

How many parts does each account have?
Select correct option:
Two
Four
Three
Five

Financial statements are a subset of which of the following?
Select correct option:
Financial reporting
Financial statement analysis
Accounting information
Accounting system

Explanation:
Accounting provides decision-makers with sufficient, relevant information to make prudent and intelligent business decisions. This information is provided through accounting reports called financial statements. The whole process is called “financial reporting

Which of the following principle is used for recording a revenue?
Select correct option:
Matching Principle
Cost Principle
Realization Principle
Objectivity Principle

Mr. A purchases a piece of land for cash and debit made to machinery account. What would be the effect of this error on the trial balance?
Select correct option:
Debit side would be decrease with the same amount
Credit side would be increase with the same amount
Total of the trial balance would be agree in all aspect
None of the given options

Accounting is called the “language of business” because__________:
Select correct option:
It communicates the financial information to the Management only
In order to run a business one must have knowledge about accounting
Different business accounts are involved in financial statements
It helps to organize and communicate financial information to end users
Which of the following is/are current asset?
Select correct option:
Rent paid for next six months
Cash at bank
Investments in stock market for two weeks
All of the given option


Which of the following is the third step of accounting cycle?
Select correct option:
Preparing financial statements
Preparing trial balance
Posting
Making adjusting entries

èABC Company has Rs. 150,000 cash, Rs. 80,000 as accounts receivables, Rs. 20,000 as
allowance for doubtful accounts, Rs. 10,000 as work in progress inventory, Rs. 55,000 as
prepaid expenses, Rs. 50,000 land purchased in the current year. Calculate the value of
current assets.
Select correct option:
Rs. 275,000
Rs. 315,000
Rs. 365,000
Rs. 220,000

The definition of cash as used in “Cash Flow Statements” includes:
Select correct option:
Only cash balances
Only bank balances
Bank balances and bank overdrafts
Cash in hand plus bank balances less bank overdrafts

Company XYZ purchases Machinery on credit; Journal entry would be:
Select correct option:
Accounts Payable debit; Machinery Credit
Accounts Receivable debit; Machinery Credit
Machinery Debit; Accounts Payable credit
Machinery Debit; Accounts Receivable credit

Adjusting entries are required for which of the following accounts?
Select correct option:
Income Summary accounts
Revenue and expense accounts
All types of accounts
Assets and liabilities accounts

In which of the following account, a credit balance would be an evidence for a mistake or an error?
Select correct option:
Mr. A Capital Account
Cash account
Notes payable account
Drawings account

Which of the following would be considered a cash-flow item from an "operating" activity?
Select correct option:
Cash outflow to the government for taxes
Cash outflow to shareholders as dividends
Cash inflow to the firm from selling new common equity shares
Cash outflow to purchase bonds issued by another company

Which of the following account would be classified as a current asset on the balance sheet?
Select correct option:
Accumulated depreciation
Accounts receivable
Office equipment
Land

How the transactions in a journal are initially recorded?
Select correct option:
Alphabetical order
Ascending order
Chronological order
Alphanumeric order

Which of the following terms present a cause and effect relationship with each other?
Select correct option:
Income statement and balance sheet
Revenue and assets
Assets and liabilities
Revenues and expenses

Explanation:
It would thus be seen that there is cause-and-effect relationship between revenues and expenses. For example, June salaries are paid in July but these have to be recorded as salaries expense for June. It must also be noted that Revenue & cash Receipts and Expense & cash payments are different. The two can happen before, after or during the accounting period

èUse the following information to calculate net cash from investing activities: sell a capital
asset for Rs. 10,000 cash and a Rs. 1,000 gain; purchase a bond investment for Rs.
16,000; receive Rs. 2,000 interest payment from the bond investment; and pay off a Rs.
3,000 mortgage payable.
Select correct option:
Rs. 6,000 net cash
Rs. 4,000 net cash
Rs. 5,000 net cash
Rs. 9,000 net cash

A business has purchased a building on cash, how it would be recorded in the journal?
Select correct option:
Building - Debit; Cash - Credit
Cash -Debit; Building - Credit
Building - Debit; Owner’s equity - Credit
Building - Debit; Accounts Payable - Credit


Which of the following is NOT one of the four basic financial statements?
Select correct option:
Balance sheet
Audit report
Income statement
Statement of cash flows


Cash has been described as:
Select correct option:
The lifebuoy of the business
The lifeboat of the business
The lifeline of the business
The lifeblood of the business

Which of the following refers to the term “posting”?
Select correct option:
The recording of transactions
The system of giving numbers to the accounts
Transferring the debits and credits to ledger
Transferring the debits and credits to journal

An advantage of the single-step income statement over the multi-step form is:
Select correct option:
Its use in computing ratios
Its simplicity
Its comprehensiveness
The amount of information it provides

Which of the following is the next step after the preparation of trial balance?
Select correct option:
Adjusted trial balance
Financial statements
Adjusting entries
Closing entries

An account that will not be included in "After Closing Trial Balance" is:
Select correct option:
Bank account
Depreciation account
Notes payable account
Unearned revenue account

Current assets are those assets which management intends to convert into cash or
consume within:
Select correct option:
The operating cycle
One year
The longer of operating cycle or one year
The shorter of operating cycle or one year

The appropriate journal entry to record equipment depreciation expense would consist of
a debit to Depreciation Expense and a credit to which of the following accounts?
Select correct option:
Equipment
Accumulated Depreciation: Equipment
Retained Earnings
Cash
All of the followings are the objectives of statement of cash flows EXCEPT:
Select correct option:
It is helpful for decision making by management
It is used for reporting the net profit of the period
It can be used for estimations for cash flows in future
It is used to determine the liquidity of the business

Pre-paid expense is a(n) _________ type of account.
Select correct option:
Liability
Asset
Revenue
Expense

Which of the following is a special temporary account used to close all of the revenue
and expense accounts?
Select correct option:
Close-out Summary
Owner’s Capital
Income Summary
Temporary Summary

Which of the following account will appear in the post-closing trial balance?
Select correct option:
Owner’s Capital
Service Fees Earned
Income Summary
Owner’s Withdrawals

If the estimated amount of depreciation on equipment for a period is Rs.2000, the
adjusting entry to record depreciation would be:
Select correct option:
Depreciation expense - Debit; Equipment - Credit
Depreciation expense - Debit; Accumulated depreciation - Credit
Equipment - Debit; Depreciation expense - Credit
Accumulated depreciation - Debit; Depreciation expense - Credit

Which of the following expenses would normally be classified as Other or Non Operating
Expense on a multiple-step income statement?
Select correct option:
Interest expense
Depreciation expense
Insurance expense
Salaries expense

Which of the following type of reports is most frequently used by external users, such as
investors?
Select correct option:
Financial Statements
Tax Forms
Management Reports
Audit reports

Which of the following is the largest single expense of most merchandising firms?
Select correct option:
Cost of goods sold
Rent Expense
Amortization Expense
Salaries Expense

Which one of the following is the part of the income statement?
Select correct option:
Capital
Accounts receivables
Advertising expenses
Accounts payable

Adjusting entries are used to:
Select correct option:
Bring account balances up to date at year end
Close temporary accounts at year end
Close permanent accounts at year end
Bring account balances at zero
Closing entries result in net income being calculated in the income summary account and
then transferred to which of the following account?
Select correct option:
Revenue account
Common Stock account
Dividends account
Retained Earnings account

Which of the following financial statement is based on accounting equation?
Select correct option:
Income Statement
Statement of Cash Flow
Balance Sheet
Statement of retained earnings

There are five main kinds of current assets. Which of the following is NOT among them?
Select correct option:
Cash and equivalents
Deferred income
Accounts receivable
Prepaid expenses

The right side of an account is a:
Select correct option:
Debit side
Credit side
Balance of that account
Carried to the next accounting period

An entry that effects more than one accounts is knows as _____________.
Select correct option:
Journal entry
Compound entry
Adjusting entry
Reversing entry

Statement of cash flows helps the investors and other stake holders to assess:
Select correct option:
The ability to generate future cash flows
The liquidity of the business
Ability to pay cash dividends in the future
All of the given options

The basic purpose of financial statements is to assist users in evaluating the________
Select correct option:
Financial position
Profitability of an organization
Future prospects
All of the given options

Which of the following is true about the “Profit” earned by the business?
Select correct option:
It shows the amount that is received from the customer in cash only
It always results in increase in closing cash balance of a period
It affects the owner’s equity and liabilities in balance sheet
It may improves the liquidity position of a business

Which of the following term refers to each element of the Balance Sheet?
Select correct option:
Ledger
Journal General
T- Account
Account

Explanation:
Each element/sub-element of the balance sheet is named as “Account”,

Resources owned by a business are called:
Select correct option:
Owner’s equity
Assets
Reserves
Liabilities

Which of the following principle states that the assets are purchased for the use and not
for resale purpose?
Select correct option:
Stable Currency principle
Objectivity Principle
Going-concern principle
Cost Principle
A journal entry that has more than one debit or credit is known as:
Select correct option:
Double entry
Multiple entry
Compound entry
None of the given option

Which of the following would be affected by the difference between revenues and expenses?
Select correct option vuzs :
Assets
Owner’s equity
Liabilities
Capital

Which of the following principle provides the definite and factual basis for assets valuation?
Select correct option:
Stable Currency principle
Objectivity Principle
Matching Principle
Cost Principle

Which of the following is true about "After closing trial balance"?
Select correct option:
It may consist of balances of only Real and Personal accounts
It may consist of balances of only Nominal and Real accounts
It may consist of balances of Nominal, Real and Personal accounts
It may consist of balances of only Nominal and Personal accounts

Which of the following is an example of an accrual?
Select correct option:
Equipment purchased for use in the business
Book-keeping fees collected but not yet earned
Six months’ rent paid in advance
Interest earned but not yet received

Which of the following is the most common adjusting entry?
Select correct option:
Un-earned revenue
Pre-paid expense
Depreciation expense
Accrued revenue

Financial Statments are the end product of:
Select correct option:
Accounting Department
Accounting Cycle
Accountant
Auditors
Using the following information calculate Net Income: Sales Revenue Rs.200, 000, Loss
on Sale of Equipment Rs.10, 000, Amortization Expense Rs.20, 000 and Cost of Goods
Sold Rs.50, 000.
Select correct option:
Rs. 170,000
Rs. 130,000
Rs. 120,000
Rs. 180,000

Journal entries are done at the end of the accounting period for which type of accounts?
Select correct option:
Assets and liabilities
Office supplies and office equipment
Raw material and office supplies
Depreciation and expenses

The Drawing account is closed by which of the following entry?
Select correct option:
Capital – Debit; Drawing - Credit
Drawing – Debit; Capital - Credit
Income Summary – Debit; Drawing - Crediting
Drawing – Debit; Income Summary - Crediting

Which of the following is NOT an example of cash equivalents?
Select correct option:
Certificates of Deposit
Money market accounts
Money market mutual funds
Euro Bond

Which of the following is/are true about the journal entry?
Select correct option:
It is recording before posting in a ledger
It always effect two sides of accounts
It is recorded chronologically
All of the given options

Which of the following may include the “analyzing the transaction” the first step of the
accounting cycle?
Select correct option:
Determining the transaction amount
Determining the effected accounts
Identifying the event as a transaction
All of the given options

Primary purpose of the cash flows statement is to provide the information about:
Select correct option:
Errors or discrepancies between cash book and income statement
Receipts and payments of cash in the period
Non cash adjustment that effect the income statement
Cash paid to the customers and creditors of the business

Which of the following represents the negative future cash flows for an enterprise?
Select correct option:
Assets
Owner’s equity
Liabilities
Capital

Explanation:
The positive future cash flows may come directly as the asset is converted into cash (collection of a receivables) or indirectly as the asset is used in operating the business to create other assets that result in positive future cash flows (building & land used to manufacture a product for sale).


The investments made by the business for ten years in a saving scheme will be classified as:
Select correct vu zs option:
Fixed assets
Long term asset
Liquid asset
Bonds

Identifying that which two or more Accounts are affected by a particular financial transaction refers to which of the following?
Select correct option:
Analyzing the transaction
Recording a transaction
Vouchering a transaction
Posting a transaction

According to _______ the personal expenses paid by Mr. A from his own pocket would
not be recorded in business books of account.
Select correct option:
Realization principle
Separate entity principle
Matching principle
Materiality principle

Explanation:
Entity principle: specific business entity separate from personal affairs of the owner.


Net current assets are equivalent to:
Select correct option:
Stock plus debtors plus cash
Current liabilities less current assets
Working capital
Fixed assets plus current assets less current liabilities

On November 30, 2008 ABC Company borrowed Rs. 4,000 from bank by issuing an interest-bearing note payable. This loan is to be paid in three months along with interest
computed at an annual rate of 9%. What will be the entry on Nov 30 to record this borrowing?
Select correct option:
Cash – Debit; Notes payable – Credit
Notes payable – Debit; Cash – Credit
Interest expense – Debit; Cash – Credit
Interest payable – Debit; Notes payable - Credit

Which of the following would NOT be the characteristics of current assets?
Select correct option:
Likely to change before the next accounting period is over
Not bought for resale
Use as part of the firm's trading operations
Liquidity

Which of the following represents the resources owned by a business?
Select correct option:
Liabilities
Owner’s Equity
Assets
Revenue

Identify the statement that is NOT true about the Incomes Account and Expenses
Account:
Select correct option:
These are the temporary accounts
These are closed in Income summery account
These may included in closing trial balance
These are also known as Nominal Accounts

Explanation:
  1. The revenue, expense, and drawing accounts are called temporary accounts, are nominal
accounts, because they accumulate the transactions of only one accounting period.
  1. Revenue and expense accounts are closed at the end of each accounting period by
transferring their balances to a summary account called income summary
Which of the following would represent a non-cash expense for the business?
Select correct option:
Cost of building
Cost of inventory
Cost of office equipment
Depreciation of building

Explanation:
An expense reported on the income statement that did not require the use of cash during the period shown in the heading of the income statement. The typical example is depreciation expense. Also, the write-down of an asset's carrying amount will result in a noncash charge against earnings

All of the following accounts would be closed in Income Summery Account EXCEPT:
Select correct option:
Commission earned account
Prepaid insurance
Salaries Expense account
Wages account

Which one of the following statement shows the effects of cash inflows and outflows?
Select correct option:
Balance Sheet
Statement of Owner’s Equity
Income Statement
Statement of Cash Flows

Explanation:
Statement of cash flows giving a picture of cash inflows (receipts) and cash outflows (payments) over/during the accounting period. It is prepared from the two major financial statements viz Income Statement and Balance Sheet.

Which of the following truly represents expenses?
Select correct option:
Future benefits
Past results
Cost of doing business
Past receipts

Assets of the business are valued and recorded at cost in the financial statement as these are not for resale purposes, according to which of the following?
Select correct option:
Going concern assumption
Cost Principle
Separate entity principle
Objectivity principle

In statement of cash flows, which of the following would not be considered an item from
an "investing" activity?
Select correct option:
Collections on loan
Purchase of marketable securities
Purchase of fixed assets
Payments of dividends

When preparing a statement of cash flows under the indirect method, supplemental disclosure should be made for which of the following?
Select correct option:
Net cash consumed by operating activities
Cash dividend distributions
Cash paid for interest and taxes
Cash paid for wages

Which of the following would represent a cash flow from financing activities?
Select correct option:
Receipts from sale of plant and equipment
Dividends received on equity securities
Gain on sale of plant asset
Collections on loan principle

All of the following have an effect on ‘operating activities’ while preparing the statement
of cash flows except:
Select correct option:
Provision for doubtful debts
Gain or loss on currency exchange rate
Depreciation charged on fixed asset
Amount received for disposal of a fixed asset

Decision makers compare net income to net cash from operating activities. To make these
amounts more comparable, the same accounts are included in each. The following
accounts are used to compute both net income and net cash from operating activities
EXCEPT:
Select correct option:
Dividends declared and paid
Dividend revenue
Interest expense
Interest revenue

The income statement of the UBL shows the interest revenue of Rs. 6,000, and the amount of accrued interest receivable has increased from Rs. 3000 to Rs. 4000 during the year. Calculate the amount of interest received.
Select correct option:
Rs. 7000
Rs. 5000
Rs. 8000
Rs. 1000

In statement of cash flows, all of the following items are considered as financing activity,
except:
Select correct option:
Cash received from issuance of shares
Cash received from issuance of bonds
Payment made for short term debts
Collections on loans
Depreciation is added back to profit when arriving at the cash flow from operating
activities because:
Select correct option:
Depreciation is only an estimated amount
Depreciation does not affect profit
Depreciation does not result in a flow of cash
Depreciation only affects the balance sheet, not the profit and loss account

In statement of cash flows, interest payment made on loan from bank is related to:
Select correct option:
Investing activity
Financing activity
Operating activity
Net changes in working capital

The users of a statement of cash flows usually are interested in:
Select correct option:
Net cash flow from operating activities
Net cash flow from investing activities
Net cash flow from financing activities
Net cash flow from non-cash transactions

Transferring debits and credits from journal to ledger account known as:
Select correct option:
Posting
Classification
Ledgerlizing
All of the given option

Cash flow relating to investing activities does NOT present the cash effects of which of
the following?
Select correct option:
Plant assets
Intangible assets
Investments
Debt financing

Which of the following is the second name for the journal?
Select correct option:
Book of default entries
Book of original entries
Book of detailed entries
Book of annual entries

Which of the following would be considered as cash flow from investing activities?
Select correct option:
Expenditure for sale of plant and equipment
Payments to suppliers
Proceeds from issuance of long-term debt
Receipts from sale of goods or services

In the long run, a business must generate positive net cash flow from which of the
following activities, if it is to survive?
Select correct option:
Investing activities
Financing activities
Operating activities
Non cash activities

When cash flow statement is prepared by using indirect method, which part of it is
different from the direct method?
Select correct option:
Cash flow from investing activities
Cash flow from financing activities
Cash flow from operating activities
All parts are same in both methods

Which one of the following transactions should be classified as a financing activity?
Select correct option:
Purchase of equipment
Purchase of treasury stock
Sale of trademarks
Income tax refund

Which of the following is the first step of the accounting cycle?
Select correct option:
Making adjusting entries
Preparation of the financial statements
Posting in the ledger accounts
Analyze and journalize transactions as they occur

If a company has paid dividends on its preference shares, under which one of the cash
flow statement headings would they appear?
Select correct option:
Returns on investments and servicing of finance
Financing
Equity dividends paid
Capital investment and financial investment


The company XYZ purchased an asset for Rs. 40,000 paying 30,000 in cash and issuing a
long term note payable for remaining balance. The amount will be recorded in statement
of cash flows as:
Select correct option:
Rs. 10,000 as investing activity
Rs. 30,000 as investing activity
Rs. 40,000 as investing activity
Rs. 70,000 as investing activity

The financial statement that captures both the current operating result and the associated
changes in the statement of financial position is:
Select correct option:
Statement of retained earnings
Statement of financial position
Statement of cash flows
Statement of changes in equity

Short term investments in marketable securities and treasury bills that will mature within
ninety days from the date of acquisition, must be classified as:
Select correct option:
Receivables
Receipts from Capital
Current and intangible assets
Cash equivalents

Which of the following items are NOT added back to the net income figure (which is
found on the Income Statement) to arrive at cash flows from operations?
Select correct option:
Depreciation
Deferred tax
Amortization
Investments
According to the statement of cash flows; following are the examples of investing
activities except:
Select correct option:
Sales of machinery
Capital invested by the owners
Purchase of building for the business use
Cash received from the disposal of equipment

Which of the following people and groups are NOT interested in cash flow statements of
a company?
Select correct option:
Accounting personnel
Potential customers
Potential creditors
Potential employees

Which of the following is deducted from the net income while preparing cash flow statement by indirect method?
Select correct option:
Decrease in inventories
Increase in accounts payable
Depreciation
Increase in inventories

Which of the following is NOT a cash outflow for the firm?
Select correct option:
Depreciation expense
Dividends payments
Interest payments
Tax payments

Which one of the following would lead to the decrease in the owner’s equity?
Select correct option:
Purchasing a piece of land
Paying dividends to shareholders
Purchasing equipment on account
Paying back the principal of a loan

Which of the following items are included in the financing activities section of the
statement of cash flows?
Select correct option:
Cash effects of transactions involving making and collecting loans
Cash effects of acquiring and disposing of investments and property, plant, and
equipment
Cash effects of transactions obtaining resources from owners and providing them with a
return on their investment
Cash effects of transactions that enter into the determination of net income

While preparing the cash flows statement, transactions involving production and
delivering goods or providing services must be classified as:
Select correct option:
Business activities
Operating activities
Financing activities
Investing activities

A company has interest expense of Rs. 35,000, its accrued liabilities are increased by Rs.
7000. Calculate the cash payments for the interest.
Select correct option:
Rs. 28,000
Rs. 42,000
Rs. 30,000
Rs. 18,000

All of the following are included in the operating activity section of the cash flows
statement except:
Select correct option:
Depreciation expense
Gain or loss on sale of fixed assets
Loan received for the purchase of inventory
Provision for doubtful debts

Which of the following section of cash flow statement shows the cash effects of those
transactions reported in the income statement?
Select correct option:
Cash flow from investing activities
Cash flow from financing activities
Cash flow from operating activities
All parts show effects of different transactions of income statement
Which of the following is the adjustment that is added during the reconciliation of net
income to operating cash flows in indirect method?
Select correct option:
An increase in Accounts Receivable
An increase in Prepaid Expenses
Gain on sale of capital assets
Amortization Expense

______is helpful for the investors and creditors to assess the cash and non cash aspects of
investing and financing transactions on an entity’s financial position?
Select correct option:
Balance Sheet
Income Statement
Statement of cash flows
Statement of changes in equity


èWhich of the following helps to identify the reasons for difference between the net income and net cash receipts and payment in the particular period?
Select correct option:
Bank reconciliation statement
Cash book
Statement of cash flows
Receipts and payment account