Question by CA (Dr.) G.S.Grewal – Series 59
- Deprecation is a non-cash item and this is added back to the net profit.
- Amount transferred to General Reserve will be affecting __________ Activity of Cash Flow Statement.
- Cash Flow Statement is based on
(a) Accrual basis of Accounting
(b) Cash basis of Accounting
(c) Mixed basis of Accounting
(d) Accounting Equation
Answer – Series 59
Reason: Non-cash Transactions are those transactions in which flow (inflow or outflow) of Cash and Cash Equivalents does not take place hence are added back to the net profit. Depreciation is also a non-cash expense.
Reason: Cash Flow Statements is based on Cash basis of accounting since it records inflows and outflows of Cash and Cash Equivalents.
Question – Series 76
1.Payment for purchase of fixed asset is classified or shown as investing activity for both Non-Financing and Financing Company
- A machinery is purchased under Hire-Purchase system instalment will include interest and a part of principal. Cash paid for Principal is ________________.
- An Example of Cash and Cash Equivalents:
(a) Sale of Fixed Assets
(b) Interest Received
(c) Refund of tax
(d) Marketable Securities
Answer – Series 76
Reason: Because it is associated with the objective of generate earning.
Reason: Marketable Securities are highly liquid so it is considered as Cash and Cash Equivalents..
Question – Series 77
- ‘Proposed Dividend of the Current year’ will be treated as Contingent Liability.
- An example of non-cash expenses is ____________________.
- An example of Investing Activity both for Financing and Non-Financing Companies
(a) Purchase of Non-Current Assets
(b) Purchase of Stock
(c) Transfer to General Reserve
(d) Refund of Tax
Answer – Series 77
Reason: Because it is passed after the Balance Sheet was prepared..
Reason: Purchase of Non-Current Assets either tangible or intangible is an Investing Activity.
Question – Series 86
- Payment for purchase of fixed Assets is classified or shown as investing activity for both non-finance and finance company.
- Share issue Expenses are shown as outflow of cash under ________________ activity.
- Rent received by a Real Estate company is classified as which type of activity?
(d) Financing and Investing
Answer – Series 86
Reason: Because it is associated with the objective of generating earning.
Question – Series 87
- F Ltd is carrying on a mutual fund business. It invested ₹ 20,00,000 in shares and ₹ 15,00,000 in debentures of various companies Dividend and Interest received is a financing Activity.
- Proposed Dividend of ₹ 60,000 and ₹ 50,000 as on 31st March, 2018 and 31st March, 2019 respectively. The amount of ₹ 50,000 will be ____________ as shown in the notes of accounts.
- Example of Cash and Cash Equivalents.
(a) Sale of fixed Assets
(b) Interest received
(c) Marketable securities
(d) Refund of Tax
Answer – Series 87
Reason: Because that is revenue producing Activity. i.e., Operating Activity
- Contingent Liability.
Reason: Because marketable securities are highly liquid so it is considered cash and cash Equivalents.
Question – Series 90
- Rent received by a Trading Company is an investing activity..
- Buy-Back of own shares are shown in ____________ activity under cash flow statement.
- Rent received by a Real Estate company is classified as
(a) Operating Activity
(b) Investing Activity
(c) Financing Activity
(d) Financing and Investing Activity
Answer – Series 90
Renting of property is not the Principal Revenue Producing Activity of a Trading Company. Assets owned by a Trading Company is an investing activity for it hence Rent received by a Trading is an Investing Activity.
- Financing activity
Reason: For a real estate company, purchase/sale of properties and their renting is its Principal Revenue Producing Activity. Hence, rent received is its Operating Activity.