Cash Flow Statement MCQs with Answers and Explanations
MCQs for Accountancy Class 12 Chapter 11 focus on the Cash Flow Statement—a core topic in CBSE Board exams. Mastering this chapter is crucial for scoring well and understanding how businesses analyze cash movement. These MCQs help students strengthen exam preparation, clear essential concepts, and develop real-world financial skills.
| Type of Activity | Cash Flow Example | Description |
|---|---|---|
| Operating Activities | Cash received from customers, payment to suppliers | Main business transactions, day-to-day operations |
| Investing Activities | Sale/purchase of machinery, investments | Buying or selling long-term assets and investments |
| Financing Activities | Issue of shares, repayment of loans | Capital funding and returns to owners |
MCQs for Accountancy Class 12 Chapter 11: Cash Flow Statement
These multiple choice questions test understanding of concepts like operating, investing, and financing activities as per CBSE syllabus. Practicing such MCQs prepares students for school and competitive exams. Explanation after each answer helps clear doubts and avoids common mistakes.
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Cash from operating activities will decrease due to ______.
(a) Increase in Current Assets
(b) Decrease in Current Liabilities
(c) Neither of the two
(d) Both (a) and (b)
Answer: (d) Both (a) and (b)
Explanation: Both higher current assets and lower current liabilities reduce operating cash flow, per AS-3 classification. -
While calculating operating profit, which will be added to net profit?
(a) Interest Received
(b) Profit on Sale of Asset
(c) Increase in General Reserve
(d) Refund of Tax
Answer: (c) Increase in General Reserve
Explanation: Non-cash/non-operating items like increase in reserve add back to net profit for cash flow calculation (Accounting Standards reference). -
While calculating cash flow from operating activities, which will be added?
(a) Increase in Stock
(b) Increase in Creditors
(c) Decrease in Bills Payable
(d) Increase in Debtors
Answer: (b) Increase in Creditors
Explanation: A rise in creditors means less cash paid, so cash flow increases. -
How will you treat payment of ‘Interest of Debentures’ while preparing a Cash Flow Statement?
(a) Cash Flow from Operating Activities
(b) Cash Flow from Investing Activities
(c) Cash Flow from Financing Activities
(d) Cash Equivalents
Answer: (c) Cash Flow from Financing Activities
Explanation: Paying interest on debentures is a financing cash outflow for companies. -
Interest received by a finance company is classified under which kind of activity while preparing a Cash Flow Statement?
(a) Operating Activities
(b) Investing Activities
(c) Financing Activities
(d) Cash Equivalent
Answer: (a) Operating Activities
Explanation: For financial firms, interest received is an operating activity. -
Cash from operation is equal to ________.
(a) Net Profit + Increase in Current Assets
(b) Net Profit + Decrease in Current Liabilities
(c) Operating Profit + Adjustment of Current Assets and Current Liabilities
(d) All of the above
Answer: (c) Operating Profit + Adjustment of Current Assets and Current Liabilities
Explanation: Adjusting net/operating profit by changes in working capital gives operational cash flow (Cash Flow Statement). -
Which of the following is included in Cash Flow from Operating Activities?
(a) Royalties, Fees, Commission
(b) Purchase of Debentures
(c) Purchase of Machinery
(d) Issue of Shares
Answer: (a) Royalties, Fees, Commission
Explanation: These are business income sources, hence operating cash flow items. -
Claims received from Insurance Companies are treated as ______.
(a) Operating Cash Inflow
(b) Investing Cash Inflow
(c) Financing Cash Inflow
(d) None of the above
Answer: (d) None of the above
Explanation: Usually, insurance claims relating to fixed assets are considered extraordinary and shown separately. -
Cash flow statement according to AS-3 is mandatory to ______.
(a) All enterprises
(b) Companies listed on a stock exchange
(c) Enterprises having turnover exceeding Rs 50 crore
(d) Both (b) and (c)
Answer: (b) Companies listed on a stock exchange
Explanation: As per India's AS-3, listed companies must prepare cash flow statements. -
Which calculates cash flow from operating activities that is added to net profit?
(a) Increase in Stock
(b) Decrease in Stock
(c) Increase in Debtors
(d) Decrease in Creditors
Answer: (b) Decrease in Stock
Explanation: Reducing stock releases cash, increasing operating cash flow.
Accountancy Class 12 Chapter 11 MCQ Solving Tips
- Always classify transactions as Operating, Investing, or Financing first.
- Adjust net profit for non-cash and non-operating items as per Accounting Standards.
- Remember: Increase in current assets or decrease in current liabilities usually reduces cash inflow.
- Avoid mixing up cash and non-cash transactions. Eg. Depreciation is non-cash.
- Refer to solved examples in DK Goel Solutions for stepwise explanations.
Download Accountancy MCQs for Class 12 Chapter 11 PDF
For offline practice, download the PDF of MCQs for Accountancy Class 12 Chapter 11 with answers. This resource helps you attempt questions quickly and revise before exams.
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Importance of Cash Flow Statement MCQs in Exams and Practice
Mastering MCQs for Accountancy Class 12 Chapter 11 boosts speed and accuracy for CBSE and competitive exams. Understanding the logic behind correct options helps reduce mistakes. Regular practice using Vedantu’s guided MCQs builds confidence for boards and professional courses.
Key Internal Links for Further Learning
- Cash Flow Statement Concepts
- Analysis of Financial Statements
- Accounting Standards (AS-3)
- Accountancy Subject Overview
- More MCQs on Cash Flow Statement
- Accounting Ratios
- Financial Statements
- Depreciation in Cash Flow Statements
- Difference Between Cash Flow and Fund Flow
In summary, MCQs for Accountancy Class 12 Chapter 11 (Cash Flow Statement) sharpen concept clarity and speed for board exams. Practicing these questions with stepwise explanations, using resources like Vedantu, ensures strong preparation and real-world application. Use provided PDFs and internal links for comprehensive revision and doubt-clearing.
FAQs on Accountancy MCQs for Class 12 Chapter 11: Cash Flow Statement
1. What are important MCQs for Accountancy Class 12?
This page provides MCQs for Accountancy Class 12 Chapter 11: Cash Flow Statement, crucial for CBSE board exam preparation. These multiple-choice questions cover key concepts like cash flow classification (operating, investing, financing activities) and necessary adjustments. Practicing these MCQs will help you understand the cash flow statement and improve your exam readiness.
2. How to download class 12 accountancy MCQ pdf?
Downloadable PDF resources containing the MCQs and their answer keys are available for offline study and self-assessment. Look for download links on the page to access these Class 12 Accountancy MCQ PDFs for convenient exam preparation.
3. How to solve cash flow statement MCQs?
Solving cash flow statement MCQs requires understanding AS-3 guidelines and the classification of cash flows. Practice using the provided MCQs and step-by-step solutions. Focus on identifying the correct cash flow activities (operating, investing, financing) and understanding necessary adjustments. Regular practice improves your speed and accuracy.
4. Which topics are covered in chapter 11 MCQs?
The MCQs comprehensively cover all topics within Accountancy Class 12 Chapter 11: Cash Flow Statement. This includes understanding the definition of operating, investing, and financing activities, analyzing cash flow statements, and applying AS-3 guidelines. The questions test your grasp of key concepts and calculations related to the cash flow statement.
5. Where can I find MCQs for Accountancy Class 12 Chapter 11 with answers?
This page offers MCQs for Accountancy Class 12 Chapter 11 (Cash Flow Statement), complete with answers and detailed explanations. These multiple-choice questions align with the CBSE syllabus and are designed to help you prepare effectively for your exams. You can also download a PDF containing the MCQs and answer key.
6. How do I download the MCQ pdf for cash flow statement chapter 11?
A downloadable PDF containing all the MCQs and their answer keys is available on this page. Look for the download button or link to obtain this resource for offline Class 12 Accountancy MCQ practice and revision of the cash flow statement.
7. Are these MCQs suitable for CBSE board exams?
Yes, these MCQs are perfectly suited for CBSE board exams. They are meticulously designed to align with the current CBSE syllabus for Accountancy Class 12 Chapter 11: Cash Flow Statement. The questions cover all essential concepts and topics, ensuring thorough exam preparation.
8. What is the most effective way to practice MCQs in accountancy?
Effective accountancy MCQ practice involves regular, focused sessions. Start with understanding the concepts, then attempt the MCQs. Review your answers carefully, understanding why you got a question right or wrong. Downloadable PDFs can help in time-bound self-testing and targeted revision. Step-by-step solutions are invaluable for identifying and addressing your weaknesses.
9. How are cash flows classified in the statement as per AS-3?
According to AS-3, cash flows are classified into three categories: operating activities (cash flows from the main business), investing activities (cash flows from buying or selling long-term assets), and financing activities (cash flows related to debt, equity, and dividends). Understanding this classification is key to solving cash flow statement MCQs.
10. Why do students often confuse investing and financing activities in MCQs?
Confusion between investing and financing activities often stems from a lack of clear understanding of their definitions and distinctions within the cash flow statement. Investing activities relate to long-term assets, while financing activities concern how the business is funded (debt, equity). Consistent practice with MCQs and a thorough understanding of the AS-3 guidelines can resolve this confusion.
