Funds Flow Statement MCQs 2024
Statement of Changes in Financial Position MCQs
(Multiple Choice Questions and Answers)
In this exclusive page, you will get Funds Flow Statement MCQs for various exams such B.Com, BBA, MCOM, MBA, CMA, CS, ICAI and UGC NET. These Funds Flow Statement MCQs are also very much helpful for various competitive exams for commerce stream students.
You can also go through various links given below in the article for Chapter wise Management Accounting MCQs.
Introduction to Funds Flow Statement
The financial statement of the business indicates assets, liabilities and capital on a particular date and also the profit or loss during a period. But it is possible that there is enough profit in the business and the financial position is also good and still there may be deficiency of cash or of working capital in business.
Financial statements are not helpful in analysing such situation. Therefore, a statement of the sources and applications of funds is prepared which indicates the utilisation of working capital during an accounting period. This statement is called Funds Flow statement.
The term flow means movement and includes both inflow and outflow of fund. The term flow of funds means the transfer of economic values from one asset of equity to another.
Flow of funds is said to have taken place when any transaction makes changes in the amount of funds available before happening of the transaction. In effect, transaction results in increase of funds are called inflow of funds and transaction which decreases funds are called outflow of funds.
Further if a transaction does not changes the funds, it is said to have no flow of funds.
According to working capital concept of fund, the term flow of funds means movement of funds in the working capital. A transaction which increases the working capital is called inflow of funds and which decreases working capital is called outflow of funds.
Choose the correct answer:
1. Current assets include:
a) Trade investments.
b) Machinery.
c) Land and Building
d) Sundry Debtors
Ans: d) Sundry
debtors.
2. Which of the following is
a non-current asset?
a) Goodwill.
b) Cash balance.
c) Bills receivable.
d) Drafts and Cheque in
hand
Ans: a) Goodwill.
3. State which of the
following is non-current liability?
a) Mortgage loan.
b) Bank balance.
c) Outstanding Salary.
d) Accounts payables
Ans: a) Mortgage
loan.
4. The term funds refers
to:
a) Cash and cash equivalents
b) Working capital
c) Reserves and Surplus
d) Fixed assets
Ans: b) Working
capital
5. Decrease in currents
assets will be treated as:
a) Source of funds
b) Applications of funds
c) Non change in funds
d) None of the above
Ans: b)
Applications of funds
6. Increase in working
capital is a:
a) Source of funds
b) Applications of funds
c) Non change in funds
d) None of the above
Ans: a) Source of
funds
7. In the fund flow
statement depreciation of machinery is a:
a) Source of funds.
b) Application of funds.
c) None of the two.
Ans: a) Source of
funds.
8. Stock in the beginning
results in:
a) Application of funds.
b) Source of funds.
c) No flow of funds.
Ans: a) Application
of funds.
9. Which of the following
are applications of funds?
a) Purchase of fixed assets
b) Increase in working capital
c) Payment of dividend
d) All of the above.
Ans: d) All of
the above.
Also Read Management Accounting MCQs (Chapter wise MCQs)
Marginal and Absorption Costing MCQs
MCQ on Budget and Budgetary Control
Financial Statement and Financial Statements Analysis MCQs
10. Which of the following
are sources of funds?
a) Issue of shares and debentures
b) Sale of assets
c) Decrease in working capital
d) All of the above
Ans: d) All of
the above.
11. Funds flow statement
holds significance for:
a) Shareholders
b) Bankers
c) Government
d) All of the above
Ans: d) All of
the above
12. Which of the following
are non-current items?
a) Share Premium.
b) Profit and Loss Account.
c) Payment of wages.
d) Sundry creditors.
e) Bank Balance.
Ans: a) Share
Premium.
b) Profit and
Loss Account.
13. Which of the following
will result into application of funds?
a) Sale of plant.
b) Payment of dividend.
c) Purchase of land.
d) Issue of share capital.
e) Payment of creditors.
Ans: b) Payment
of dividend.
c) Purchase of land.
14. Fund flow statement
represents the flow of _______ in the organisation:
a) Cash
b) Current assets
c) Current liabilities
d) Working Capital
Ans: d) Working Capital
15. Which statement is
prepared in the process of funds flow analysis?
a) Schedule of changes in working capital
b) Funds Flow statement
c) Calculation of funds from operations
d) All of the above
Ans: d) All of the
above
16. Funds flow statement
is also known as:
a) Statement of sources and applications of funds
b) Statement of flow of funds
c) Statement of changes in financial position
d) All of the above
Ans: d) All of
the above
17. When an asset with
original cost Rs. 19,000 and accumulated depreciation of Rs. 4,000 is sold for
Rs. 9,000, the transaction should be recorded in the funds flow statement as:
a) Rs. 9,000 unusual gain.
b) Rs. 9,000 use of working capital.
c) Rs. 9,000 source of working
capital.
d) Rs. 10,000 use of working capital.
Ans: c) Rs.
9,000 source of working capital.
18. In the funds flow
statement depreciation is
a) A source of working capital.
b) Added to net profit.
c) Subtracted from net profit.
d) Ignored.
Ans: b) Added
to net profit.
19. State which of the
following will affect the flow of fund?
a) A transaction affecting both current accounts.
b) A transaction affecting both non-current accounts.
c) A transaction affecting current and non-current accounts.
d) Both (a) and (b).
Ans: c) A
transaction affecting current and non-current accounts.
20. If the net profit for
a period is Rs. 50,000 after crediting a gain on sale of asset Rs. 5,000 and
debiting depreciation of Rs. 20,000 on fixed assets, the fund from operations
will be:
a) Rs. 70,000.
b) Rs. 75,000.
c) Rs. 65,000.
d) Rs. 55,000.
Ans: c) Rs. 65,000.
21. Profit made by a
business firm will result in equal increase of
a) Cash balance.
b) Gross working capital.
c) Net working capital.
d) Net worth of the business.
Ans: d) Net worth
of the business.
22.
Which statement is prepared in the process of funds flow analysis?
a) Schedule of changes in working
capital
b) Funds flow statement
c) Both a) and b) above
d) None of the above
Ans: c) Both a) and
b) above
23.
Which of the following can be shown on the sources side in fund flow statement?
a) Issue of shares
b) Securities premium reserve
c) Sale of fixed assets
d) All of the above
Ans: d) All of the
above
24.
Any increase or decrease in working capital when the transactions take place is
called as:
a) Flow of funds
b) Flow of cash and cash equivalents
c) Flow of net worth
d) None of the above
Ans: a) Flow of
funds
25.
Which of the following is not application of funds?
a) Redemption of debentures
b) Repayment of loans
c) Increase in working capital
d) Decrease in working capital
Ans: d) Decrease in
working capital
Funds Flow Statement MCQs (State whether the following statements are true or false):
a) Fund’s is the difference between fixed assets and current
assets. False
b) In the context of funds flow analysis, the word funds are
used to define
cash. False
c) Funds flow statement helps in determining the flow of
funds i.e., changes in working capital and financial
position. True
d) Any transaction that increases working capital is a source
of funds. True
e) Funds flow statement is
mandatory. False
f) Funds flow statement recognizes accrual basis of
accounting. True
g) Funds flow statement and sources and application
statements are synonymous. True
h) Increase in current assets means increase in working
capital. True
i) Decrease in current assets means increase in working
capital. False
j) A fund flow statement is a good substitute for income
statement. False
k) Funds flow statement is based upon cash
basis. False
l) Flow of funds mean increase or decrease of working
capital. True
m) Funds flow statement also suffers from window
dressing. True
n) Any transaction between a current
item and another current item does not affect working capital. True
o) The statement which shows the
periodical increase or decrease of funds is called Funds flow statement.
p) Cash is the most important source of funds for a
business. False
q) A balance sheet gives the position of funds as on a given
date but does not reveal the flow of funds during a given period. True
r) The first balance sheet of a business is also in a way the
statement showing the changes in financial position. True
s) Funds flow statement is prepared so as to analyse the
reasons for changes in financial position of a company between two balance
sheet date. True
t) Payment of cash to creditors results in flow of funds. False
u) Liabilities of a business indicate the use of funds whereas the
assets indicate the sources. False
v) The most important and regular source of funds is the
funds from operations. True
w) Machinery sold for cash is an application of
fund. False, source
x) Building sold on credit is a source of
fund. False
y) Depreciation of machinery is a source of
funds. True
z) Depreciation is a source of funds. True
aa) There will be a flow of funds when one of the accounts is
current and other one is non-current. False
bb) There will be a flow of funds when both the accounts in a
transaction are current. False
cc) There will be a flow of funds when both the accounts in a
transaction are non-current. False
dd) Net losses mean drain on working capital. True
ee) If as a result of a business transaction the fund increases,
then such a transaction is considered to be an application of fund. False
ff) Purchase of goods on credit results in flow of funds. False
gg) A transaction which affects only current accounts does not
affect the flow of funds and, therefore, is not shown in the funds flow
statement. True
Funds Flow Statement MCQs (Fill in the blanks):
a) In the context of funds flow analysis, the word funds are used
to define working capital.
b) The word ‘fund’ means the difference between current assets and current liabilities.
c) Purchase of plant will mean decrease in working capital.
d) Issue of capital will mean increase working capital.
e) Goodwill is a non-current transaction.
f) When one account is current and another a non-current it
results in flow of funds.
g) Any transaction that increases working capital is an application of fund.
h) Funds flow statement must be accompanied by a schedule of changes in working capital.
i) Repayment of borrowing causes cash Outflow.
j) Funds flow statement is prepared upon accrual basis of accounting.
k) In a Funds Flow Statement, all receipts are treated as source of funds.
l) Purchase of plant will mean decrease in working capital.
m) Funds flow statement is also known as a statement of Sources and Applications of funds.
n) The term funds refer to Working
capital.
o) Collection of book debts does not result in flow of fund.
p) An increase in the value of an asset between two balance
sheets dated indicates an application of
fund.
q) A decrease in the current assets between two balance sheet
dates indicates a source of fund.
r) If particular current assets are more than what it was in
the previous year, the change shows increase in
the working capital.
s) Sources are increase in liabilities plus decrease in assets and uses are
increase in assets plus decrease in
liabilities.
t) To arrive at funds from operations non-cash changes must be
added to net profit.
u) A funds flow statement for a period is a condensed report of
how the business got its
funds and how they were spent during
the period.
v) Increase in working capital is shown as an application and decrease in the working
capital as a source in
the funds flow statement.
w) Funds flow statement must be accompanied by a statement
of changes in working capital.
Post a Comment
Kindly give your valuable feedback to improve this website.