CFS Important Questions
CFS Important Questions
Study Materials CBSE Notes Important Questions for CBSE Class 12 Accountancy Cash Flow Statement
Important Questions for CBSE Class 12 Accountancy Cash Search for question Search
Flow Statement
Important Questions
1.Cash Flow Statement Cash flow statement is a statement showing the changes in financial position of a
business concern during different intervals of time in terms of cash and cash equivalents.
The Revised Accounting Standard-3 has made it mandatory for all listed companies to prepare and present a
cash flow statement along with other financial statements on annual basis.
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2.Cash Flows Cash flows are inflows and outflows of cash and cash equivalent. It implies movement-in and
movement-out of cash and cash equivalents. Receipt of cash from a non-cash item is termed as ‘cash inflow’,
while cash payment in respect of such item is termed as ‘cash outflow’.
Cash Cash comprises of cash in hand and demand deposits with the bank.
Cash Equivalents Cash equivalents are ‘short-term highly liquid investments that are readily convertible into
known amount of cash and which are subjected to an insignificant risk of change in value’.
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11/19/24, 9:10 AM (CBSE Class 12 Accountancy Cash Flow) Important Questions
5.Classification of Business Activities Accounting Standard-3 (Revised) requires that the changes resulting in
inflows and outflows of cash and cash equivalents will be classified into following three activities:
(i) Cash flow from operating activities.
(ii)Cash flow from investing activities.
(iii)Cash flow from financing activities.
6.Cash Flow from Operating Activities Operating activities are the principal revenue producing activities of the
enterprise and other activities that are not investing or financing activities.
7.Cash Flow from Investing Activities As per AS-3, investing activities are the acquisition and disposal of the
long-term assets and other investments, not included in cash equivalents.
Cash flow from investing activities are exhibited as follows:
8.Cash Flow from Financing Activities Financing activities are the activities which result in change in the size
and composition of the owner’s capital (including preference share capital) and borrowings (including
debentures) of the enterprise from other sources.
Cash flow arising from financing activities are exhibited as follows:
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11/19/24, 9:10 AM (CBSE Class 12 Accountancy Cash Flow) Important Questions
2.Why is separate disclosure of cash flow from investing activities important while preparing cash flow
statement? (All India 2014)
Ans. Separate disclosure of cash flows from investing activities is important because they represent to which
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investment have been made for resources, intended to generate future income and cash flows. 🙂 Tell me what's your goal for
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3.Dividend paid by a financial company is classified under which type of activity, while preparing cash
flow statement? (Compartment 2014)
Ans. It is classified under ‘financing activity’.
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11/19/24, 9:10 AM (CBSE Class 12 Accountancy Cash Flow) Important Questions
4.State the purpose or objective of preparing a cash flow statement.(Delhi 2014,2012,2011C; All India
2014,2012)
or
Why is a cash flow statement prepared? (Delhi 2010 c)
Ans. A cash flow statement provides information about the historical changes in cash and cash equivalents of an
enterprise by classifying cash flows into operating, investing and financing activities between the dates of two
balance sheets.
7.State the meaning of cash flow statement. (All India 2014,2014 c, 2011)
Ans. Cash flow statement is a statement showing the changes in financial position of a business concern during
different intervals of time in terms of cash and cash equivalents.
8.State with reason whether the issue of 9% debentures to the vendors for the purchase of machinery of
Rs 50,000 will result into inflow, outflow or no flow of cash.(All India 2014 (C), 2009)
Ans. There is no flow of cash by the issue of 9% debentures to the vendors for the purchase of machinery of Rs
50,000 because this transaction will not change the balance of cash and cash equivalents.
10.Under which type of activity will you classify ‘dividend received by a finance company’ while
preparing cash flow statement? (Delhi 2013; hots)
Ans. Dividend received by a finance company is an operating activity.
11.State with reason whether ‘purchase of fixed asset on long-term deferred payment’ would result in
inflow, outflow or no flow of cash.(Delhi 2013; hots)
Ans. No flow of cash because no cash is involved in this transaction.
12.Under which type of activity will you classify ‘refund of income tax received’ while preparing the cash
flow statement? (Delhi 2013)
Ans. Operating activity.
14.State with reason whether ‘discount received on making payment to suppliers’ would result into
inflow, outflow or no flow of cash. (All India 2013)
Ans. Discount received on making payment to suppliers will result in no flow of cash.
15.Under which type of activity will you classify ‘interest paid on long-term borrowings’ while preparing
cash flow statement?(AllIndia2013)
Ans. Interest paid on long-term borrowings is a financing activity.
16.State with reason whether ‘old furniture written-off’ would result into inflow/outflow or no flow of
cash.(All India 2013)
Ans. Old furniture written-off will result in no flow of cash.
17.Under which type of activity will you classify ‘proceeds from sale of investment’ while preparing cash
flow statement?(Delhi 2013)
Ans. Proceeds from sale of investments is an investing activity.
18.Under which type of activity will you classify ‘proceeds from sale of patents’ while preparing cash flow
statement? (All India 2013)
Ans. Proceeds from sale of patents is an investing activity.
19.Give an example of the activity which remains financing activity for every enterprise. (All India 2013;
HOTS)
Ans. Dividend paid.
20.Under which type of activity will you classify ‘commission and royalty received’while preparing cash
flow statement? (All India 2013) 1
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Ans. Commission and royalty received is an operating activity.
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11/19/24, 9:10 AM (CBSE Class 12 Accountancy Cash Flow) Important Questions
21.While preparing cash flow statement which type of activity is, ‘payment of cash to acquire debenture
by an investment company’? Delhi 2012)
Ans. Operating activity.
22.While preparing cash flow statement which type of activity is, ‘payment of cash to acquire shares by a
trading company’? (Delhi 2012)
Ans. Investing activity.
23.State with reason whether ‘deposit of cash into bank’ will result into, inflow,outflow or no flow of
cash. (Delhi 2011; hots)
Ans. ‘Deposit of cash into bank’ does not result in cash flow. It is simply a movement between two components
of cash and cash equivalents.
24.List any two investing activities which result into outflow of cash.(All India 2011; Delhi 2011 C)
Ans. Two investing activities which result into outflow of cash are:
(i) Building purchased.
(ii) Investments purchased.
25.’Payment of dividend’ will come under which type of activity while preparing a cash flow statement?
(All India 2011; Delhi 2008)
Ans. ‘Payment of dividend’ is classified as ‘financing activity’ while preparing a cash flow statement.
26.List any two financing activities that will result into outflow of cash.(All India 2011; Delhi 2011 C)
Ans. Two financing activities that result into outflow of cash are:
(i) Redemption of debentures.
(ii) Interest paid on debentures.
27.Name any two financing activities that result into inflow of cash. (All India 2011)
Ans.The two financing activities that result into inflow of cash are:
(i) Cash proceeds from issue of shares (ii) Cash proceeds from issue of debentures
28.Name any two investing activities that result into inflow of cash. (All India 2011)
Ans.Two investing activities that result into inflow of cash are:
(i) Cash proceeds from sale of building.
(ii) Cash proceeds form sale of investments.
29.State with reason whether ‘withdrawal of cash from bank’ will result into, inflow,outflow or no flow
Of cash.(Foreign 2011; HOTS)
Ans. ‘Withdrawal of cash from bank’ does not result in cash flow. It is simply a movement between two
components of cash and cash equivalents.
30.Under which type of activity will you classify ‘issuing 9% debentures’ while preparing cash flow
statement? (Delhi 2010)
Ans. Financing activity.
31.Declaration of final dividend would result into inflow, outflow or no flow of cash.Give your answer
with reason. (Delhi 2010)
Ans. No flow of cash as final dividend is only declared, not yet paid.
32.Under which type of activity will you classify ‘proceeds from sale of machinery’ while preparing cash
flow statement? (Delhi 2010)
Ans. Investing activity.
33.Interest received on debentures would result into inflow, outflow or no flow of cash.(All India 2010)
Ans. Cash inflow, because cash comes in due to interest received on debentures.
34.Give one difference between an operating activity and a financing activity.(Delhi 2010 C)
Ans. Operating activity is the principal revenue producing activity of an enterprise whereas, financing activity are
those activities which change the size and composition of owner’s equity and borrowings of an enterprise.
35.Give any two transactions which result into ‘inflow of cash’. (All India2010)
Ans. (i) Cash proceeds from sale of investments. (ii) Cash proceeds from issue of debentures.
36.Give one difference between an operating activity and an investing activity.(All India 2010)
Ans. Operating activity is the principal revenue producing activity of an enterprise whereas, investing activity
includes the acquisition and disposal of fixed assets.
37.Give one transaction which may result into outflow of cash and one which may result into no flow of
cash.(All India 2010)
Ans. Outflow of cash Purchase of investments. No flow of cash Cash deposited into the bank.
38.State why non-cash transactions are ignored while preparing a cash flow Statement? (Delhi; All India 1
2009) 🙂 Tell me what's your goal for
Ans. Non-cash transactions are ignored while preparing a cash flow statement because cash flow statement future?
shows flow of cash and cash equivalents during a given period.
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11/19/24, 9:10 AM (CBSE Class 12 Accountancy Cash Flow) Important Questions
39.When is dividend received considered as an operating activity?(Delhi 2009; All India 2009; HOTS)
Ans. Dividend received is considered as an operating activity when company is a financing or investing
company.
40.State why cash flow statement is not a substitute for income statement?(Delhi 2009; All India 2009)
Ans. An income statement shows both cash and non-cash items. It shows net income of the firm. Cash flow
represents only net cash inflow or outflow of cash. So, cash flow statement can’t be taken as substitute for
income statement.
41.When is interest received considered as financing activity? (Delhi 2009; All India 2009)
Ans. Interest received is never considered as a financing activity.
42.State with reason whether charging of depreciation on furniture will result into inflow, outflow or no
flow of cash.(Delhi 2009c)
Ans. There will be no flow of cash because depreciation on furniture is a non-cash expense.
43.’Cash receipts from sale of goods by a trading company’ will come under which activity while
preparing cash flow statement? (Delhi 2009c)
Ans. At the time of preparing cash flow statement, ‘cash receipts from sale of goods by a trading company’ will
come under operating activity because sale of goods is the main revenue producing activity for a trading
company.
44.Dividend received by a finance company will come under which activity while preparing a cash flow
statement?(All India 2009; hots)
Ans. ‘Dividend received by a financing company’ is classified under operating activity because dividend received
is the receipt from principal revenue producing activities of the business.
45.State whether ‘conversion of debentures into equity shares’ by a financing company will result into
inflow, outflow or no flow of cash?(Delhi 2008)
Ans. ‘Conversion of debentures into equity shares’ does not result in cash flow. It is simply a movement between
two components of financing activities.
46.State whether ‘the payment of cash to creditors’ will result into inflow, outflow or no flow Of cash.
(All India 2008)
Ans. It will result in outflow of cash.
47.’Dividend paid by a manufacturing company’ is classified under which kind of activity while preparing
a cash flow statement? (All India 2008)
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Ans. ‘Dividend paid by a manufacturing company’ is classified as a financing activity.
48.State whether ‘depreciation charged by a company’ will result into inflow, outflow or no flow of cash.
(All India 2008)
Ans. There will be no flow of cash because depreciation is a non-cash expense.
49.’Interest paid by an investment company’ will come under which activity while preparing a cash flow
statement? (All India 2008; hots )
Ans. ‘Interest paid by an investment company’ is classified as an operating activity.
50.State whether the ‘purchase of goods on credit’ will result into inflow, outflow or no flow Of cash.
(Foreign 2008)
Ans. There is no flow of cash because purchase of goods on credit will not affect cash.
6 Marks Questions
51.Prepare a cash flow statement on the basis of the information given in the balance sheet of Simco Ltd
as at 31st March, 2013 and 2012
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11/19/24, 9:10 AM (CBSE Class 12 Accountancy Cash Flow) Important Questions
Ans.
Additional Information
During the year, a piece of machinery of the book value of Rs 80,000 was sold for Rs 65,000. Depreciation
provided on tangible assets during the year amounted to Rs 2,00,000.Prepare a cash flow statement.
(Delhi 2013)
Ans.
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11/19/24, 9:10 AM (CBSE Class 12 Accountancy Cash Flow) Important Questions
53.Following is the balance sheet of Krishtec Ltd for the year ended 31st March, 2011 and 2012.
Ans.
54.From the following balance sheet of JN Ltd as on 31st March, 2010 and 2011, prepare a cash flow
statement.
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Additional Information
During the year a building having book value Rs 1,25,000 was sold at a loss of Rs 8,000 and depreciation
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11/19/24, 9:10 AM (CBSE Class 12 Accountancy Cash Flow) Important Questions
55.From the following balance sheet of BCR Ltd as at 31st March, 2010 and 2011. Prepare a cash flow
statement
Additional Information
During the year, equipment costing Rs 1,00,000 was purchased. Loss on sale of equipment amounted to
Rs 12,000. Rs 18,000 depreciation was charged on equipment.(All India 2012; Modified)
Ans.
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11/19/24, 9:10 AM (CBSE Class 12 Accountancy Cash Flow) Important Questions
56.From the following information prepare a ‘cash flow statement’ for Ronak Ltd. Balance sheet of Ronak
Ltd as at 31st March, 2011 and 2012.
Additional Information
(i)Debentures were issued on 1st April, 2011.
(ii)During the year a machine included in fixed assets costing Rs 1,20,000 was purchased and another
machine of the book value of Rs 30,000 was sold at a loss of Rs 2,000. (Delhi 2012; Modified)
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11/19/24, 9:10 AM (CBSE Class 12 Accountancy Cash Flow) Important Questions
Ans.
57.From the following balance sheet of Vijaya Ltd as at 31st March, 2009 and 2010. Prepare the cash flow
statement.
Additional Information
(i)Depreciation on fixed assets for the year 2009-2010 was Rs 14,700.
(ii)An interim dividend Rs 7,000 has been paid to the shareholders during the year.(Delhi 2011, Modified)
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11/19/24, 9:10 AM (CBSE Class 12 Accountancy Cash Flow) Important Questions
Ans.
58.From the following balance sheet of Vikas Ltd as at 31st March, 2009 and 2010. Prepare the cash flow
statement.
Additional Information
(i)Depreciation charged on fixed assets for the year 2009-2010 was Rs 20,000.
(ii)Income tax Rs 5,000 has been paid in advance during the year. (All India 2011)
Ans.
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11/19/24, 9:10 AM (CBSE Class 12 Accountancy Cash Flow) Important Questions
59.From the following balance sheet and additional information of Good Wood Co, you are required to
prepare the cash flow statement as per AS-3 (Revised).
Additional Information
(i)Income tax paid during the year Rs 3,500.
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11/19/24, 9:10 AM (CBSE Class 12 Accountancy Cash Flow) Important Questions
(ii)Dividend paid during the year was 10% per annum. (Delhi 2011C; Modified)
Ans.
60.From the following balance sheet and additional information of Good Wood Co. you are required to
prepare the cash flow statement as per AS-3 (Revised).
Additional Information
(i)Income tax paid during the year Rs 4,500.
(ii)Dividend paid during the year was @12% per annum. (All India 2011; Modified)
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11/19/24, 9:10 AM (CBSE Class 12 Accountancy Cash Flow) Important Questions
Ans.
61.From the following balance sheet, prepare a cash flow statement as per AS-3 (Revised)
Ans.
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11/19/24, 9:10 AM (CBSE Class 12 Accountancy Cash Flow) Important Questions
62.From the following balance sheet of Sewak Ltd as on 31st March, 2008 and 2009, Prepare cash flow
statement.
Additional Information
Included in fixed assets was a piece of machinery costing Rs 70,000 on which depreciation charged was
Rs 40,000 and it was sold for Rs 30,000. During the year, Rs 1,40,000 depreciation was charged on fixed
assets. Prepare the cash flow statement(Delhi 2010 C; All India 2010; Modified)
Ans.
63.X Ltd made a profit of Rs 1,00,000 after considering the following items
(i)Depreciation on fixed assets Rs 20,000.
(ii)Loss on sale of furniture Rs 1,000.
(iii) Provision for taxation Rs 1,60,000.
(iv)Transfer to general reserve Rs 14,000.
(v)Profit on sale of machinery Rs 6,000.
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11/19/24, 9:10 AM (CBSE Class 12 Accountancy Cash Flow) Important Questions
Ans.
64.From the following balance sheet of Samta Ltd as at 31st March, 2007 and 2008, prepare the cash flow
statement
Additional Information
(i)During the year ? 80,000 depreciation was charged on fixed assets.
(ii)A piece of machinery included in fixed assets costing Rs 20,000 on which depreciation charged was Rs
8,000, was sold for Rs 10,000. (Delhi 2009 C; Modified)
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11/19/24, 9:10 AM (CBSE Class 12 Accountancy Cash Flow) Important Questions
Ans.
65.From the following balance sheet of Vijay Ltd as at 31st March, 2007 and 2008, prepare the cash flow
statement
Additional Information
(i)During the year Rs 50,000 depreciation was charged on fixed assets.
(ii)A piece of machinery included in fixed assets costing Rs 10,000, on which depreciation
charged was Rs 4,000, was sold for Rs 5,000. (All India 2009; Modified)
Ans.
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11/19/24, 9:10 AM (CBSE Class 12 Accountancy Cash Flow) Important Questions
66.From the following balance sheet of XY Ltd as on 31st March, 2006 and 2007, prepare a cash flow
statement
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Additional Information future?
(i)During the year, machine costing Rs 80,000 was sold for Rs 50,000.
(ii)Dividend paid Rs 80,000. (Delhi 2008; Modified)
Ans.
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11/19/24, 9:10 AM (CBSE Class 12 Accountancy Cash Flow) Important Questions
67.From the following balance sheet of EF Ltd as on 31st March, 2006 and 31st March, 2007, prepare the
cash flow statement
Additional Information
During the year machine costing Rs 50,000 was sold for Rs 15,000. Dividend paid Rs 20,000. (All India
1
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