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financial accounting for managers
Accounting For Managers 2009 Edition Rama Gopal, CA. C. - Solutions
9. true or false: A “Cash Flow Statement” can very well be equated with an “Income Statement”.
8. true or false: Funds Flow Statement and Cash Flow Statement serve the same purpose.
7. true or false: Increase in provision for doubtful debts should be added back to net profit in order to find out cash from operations.
6. true or false: Cash Flow Statement is a summary of cashbook.
5. true or false: Cash flow statement reveals the effects of transactions involving movement of cash.
4. true or false: As per AS-3 (Revised), cash flows resulting from the sale of fixed assets are classified as cash flows from investing activities.
3. true or false: Cash equivalents are short term, highly liquid investments that are readily convertible into cash.
2. true or false: Cash flow statement describes the inflows and outflows of cash.
1. true or false: Every listed company has an option to prepare and enclose the cash flow statement or funds flow statement along with the financial statements.
7. Describe Limitations of Cash Flow Statement?
6. What is a Cash Flow Statement and describe the different steps involved in preparing Cash Flow Statement? (11.2 and 11.7)
5. Differentiate between Funds Flow Statement and Cash Flow Statement? (11.11)
4. Describe different methods of preparing Cash Flow Statement? (11.9)
3. Explain the Procedure of preparing Cash Flow Statement and method of calculating fund from operating activities? (11.6, 11.7, 11.8 and 11.10)
2. Describe the classification of cash flows from Operating, Investing and Financing Activities in a Cash Flow Statement? (11.2 and 11.5)
What is the golden rule in respect of long-term and short-term sources of funds? What is the consequence of diversion of funds?
What are Short-term sources and when they are due for payment?
What are Long-term sources?
In what manner can ‘Statement of Sources and Application of Funds’ be utilized by financial institutions?
What is meant by ‘Operating Profit’? From which statement, you can find out this item?Explain the importance of the relevant statement in the context of operating profit?
Explain the different meanings of the term “Funds”?
Is Depreciation a direct source of funds?
What is depreciation? What is its impact on cash?
What is a Non-operating profit and give an example?
Who are the users of the Funds Flow Statement and for what purpose this statement is used?
What is the purpose of ‘Schedule of changes in working capital’?
When we have financial statements of Profit and Loss Account and Balance Sheet, what is the need of Funds Flow Statement, separately?
Fill in blanks: Furniture sold for cash … funds flow.
Fill in blanks: Vehicle sold on credit is … of funds.
Fill in blanks: Increase in working capital is … of funds.
Fill in blanks: Goods purchased on credit … in flow of funds.
Fill in blanks: Depreciation is sometimes treated as … funds.
Fill in blanks: Funds flow refers to changes in …
Fill in blanks: Difference between Current Assets and Current Liabilities is known as …
Fill in blanks: Any gain on sale of non-current assets should be … from the net profit for determining funds from operations.
Cash realisation from debtors increases working capitala. Yesb. Noc. None of the above answers
Vehicle sold for credit for a vehicle dealer results in…a. Increases working capitalb. Decreases working capitalc. Does not change working capital
Increase in working capital is…a. Source of funds.b. Application of funds.c. Funds from operation.d. Loss from operation.
Inflow of funds does not take place due to …a. Funds from operation.b. Increase in capital.c. Increase in working capital.d. Sale of fixed assets.
Current liabilities are equal to …a. Working capital + Current assets.b. Work-capital – Current assets.c. Current assets – Working capital.d. Current assets + Working capital.
If depreciation on furniture is in the additional information, it will be posted…a. At the debit side of adjusted profit and loss A/c.b. At the credit side of plant A/c.c. Neither of a &b. above.d. At botha. &b. above
Net loss for the period is Rs.500.What is the amount of funds generated from operations during the period by X Ltd?(a) 2,500 (b) 1,500(c) 3,500 (d) 1,400
X Ltd has sales revenue of Rs.2,000. Depreciation for the period is Rs. 3,000. Other operating expenses are Rs.
… is not a current liability.(a) Sundry Creditors. (b) Bank overdraft.(c) Outstanding expenses. (d) Long-term loan
… is not a current asset.(a) Book debts. (b) Short-term investment.(c) Long-term investment. (d) Stock.
A company engaged in financial activities receives interest. Such interest is …(a) Operating income. (b) Non-operating income.(c) Loss from operation. (d) Non-operational charge.
By preparing provision for taxation A/c, we can find out the missing figure of …(a) Taxes paid during the year. (b) Taxes provided during the year.(c) Either ofa. &b. above. (d) Neither ofa. &b. above.
Increase in a fixed asset due to issue of shares is(a) Source of funds. (b) Use of funds(c) None.
Depreciation is a source of funds(a) Yes (b) No(c) Both Yes and NO
Net profit earned plus non- operating expenses is equal to(a) Funds provided by operations. (b) Use of funds.(c) Sinking fund.
Which of the following will result in flow of funds :(a) Purchase of furniture on credit. (b) Writing of goodwill.(c) Depreciation of assets. (d) Appreciation in Building.
Sale of investments indicate(a) Source of funds. (b) Application of funds.(c) None of the above.
Stock at the end results in the(a) Application of fund. (b) Source of funds.(c) No flow of funds.
True or False A funds flow statement shows diversion of working capital for purchase of fixed assets.
True or False Flow of funds takes place from transactions, when one account is current and the other is non-current.
True or False As per existing legal requirement, in case of a limited company, it is not required to publish statement of changes in financial position along with other financial statements.
True or False In funds flow statement, if both the affected accounts relate to working capital only they appear.
True or False Funds flow statement points out the sources from which additional funds have been received during the year and the uses to which funds have been applied.
True or False Statement of change in financial position identifies changes in assets, liabilities and the shareholders’ funds over a given period.
True or False Basic financial statements (Profit and Loss account and Balance sheet) fail to show the movement and causes of changes in assets and liabilities during the year.
True or False Income statements need not be prepared but funds flow statements are required to be compulsorily prepared.
True or False Statement of change in financial position can be either funds flow statement or cash flow statement.
True or False Loss on sale of machine should be added to net profit for calculating funds from operations.
True or False The term ‘fund’ in a fund flow statement refers to working capital.
Differentiate between :(a) Funds Flow Statement and Income Statement (10.11)(b) Funds Flow Statement and Balance Sheet
Explain briefly the procedure and steps to be followed for preparing Funds Flow Statement?(10.1 and 10.10)
Depreciation is a source to the extent of reduction of tax liability – Explain with a suitable example? (10.7)
“Depreciation is an indirect source of funds under certain circumstances – Explain? (10.7)
“Depreciation can be taken as a source of funds in a limited sense”. Illustrate with a suitable example? (10.7)
What are the different Sources and Applications in a Funds Flow Statement? (10.2, 10.6 and 10.8)
Describe the need and limitations of Funds Flow Statement? (10.1 and 10.12)
Describe the significance of Funds Flow Statement to the different users? (10.5)
Explain the need, meaning, importance and objectives of Funds Flow Statement? (10.1 and 10.4)
Between the two objectives – liquidity and profitability, which objective is important and why?
What is the importance of liquidity?
Which assets, fixed assets or current assets, are important to a firm?
How ratio analysis helps in forecasting or predicting the future performance of a firm?
Why “Trading on Equity’ is called as a ‘Double edged sword’?
What is meant by “Trading on Equity”?
When borrowing is favourable to the equity shareholders?
Name the different sources of funds for a long-term commitment?
Name an important indicator for purchase / sale of a share in respect of market price?Explain the reasoning for the indicator chosen?
What is the expansion of ‘EPS’? Whether net profit, totally, belongs to the equity shareholders?
What is meant by Bonus Shares? Whether their issue results in the outflow of cash? Justify your statement.
Why preference shareholders are not called as the real owners of the company?
Gross profit ratio has gone up, but net profit ratio has gone down. What is the possible explanation?
Name any four ratios that the management of every firm is interested in, along with their significance?
What is the purpose of Ratio Analysis?
What is indicated by Debt–Equity Ratio?
Illustrate the concept of ‘Window Dressing’ with a suitable example?
What is ‘Net Worth’ and explain its significance?
True or False Profit is a not factor of sales.
True or False An appropriate debt-equity combination involves a trade-off between return and risk.
True or False A low debt equity ratio indicates a greater claim of owners than creditors on the assets concerned of the firm.
True or False The term ‘Investment’ may refer to total assets or net assets.
True or False A high debt company can borrow on favourable terms and conditions.
True or False If cost of debt is lower than the firm’s overall rate of return, the earnings of shareholders will be reduced.
True or False Ratio analysis is a technique of planning and control.
True or False The process of magnifying the equity shareholder’s earnings through the use of debt is called‘Financial Leverage’ or ‘Trading on Equity’.
True or False ‘Acid Test’ denotes liquidity.
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