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Questions and Answers
How should the revaluation of Fixed Assets be treated in a Cash Flow Statement?
How should the revaluation of Fixed Assets be treated in a Cash Flow Statement?
- As part of cash flow from investing activities
- As an outflow in operating activities
- As an inflow in financing activities
- As a non-cash transaction (correct)
In the cash flow statement, how is Cash Flow From Operating Activities primarily calculated?
In the cash flow statement, how is Cash Flow From Operating Activities primarily calculated?
- By recording only cash received from customers
- By calculating the total revenue minus total expenses
- By adjusting net income for non-cash items and changes in working capital (correct)
- By summing all cash inflows and outflows from financing activities
When recording financing activities in the cash flow statement, which of the following is included?
When recording financing activities in the cash flow statement, which of the following is included?
- Issuance of new shares or debt (correct)
- Operational expenses paid
- Dividends paid to shareholders
- Payments received from customers
How should provision for bad debts be treated in the cash flow statement?
How should provision for bad debts be treated in the cash flow statement?
Which of the following statements correctly relates to depreciation in cash flow calculations?
Which of the following statements correctly relates to depreciation in cash flow calculations?
What effect do policyholder bonuses have on cash flow statements?
What effect do policyholder bonuses have on cash flow statements?
What is the discount rebate on a bill discounted if it is calculated at an 8% rate for a period of 5 months?
What is the discount rebate on a bill discounted if it is calculated at an 8% rate for a period of 5 months?
In cash flow statements, which activity would NOT typically fall under operating cash flows?
In cash flow statements, which activity would NOT typically fall under operating cash flows?
If a banking company identifies a loan with secured exposure of Rs.200 lakh and unsecured exposure of Rs.300 lakh as sub-standard, what is the provision required?
If a banking company identifies a loan with secured exposure of Rs.200 lakh and unsecured exposure of Rs.300 lakh as sub-standard, what is the provision required?
Which item would reduce net income when applying the indirect method for calculating cash flows from operating activities?
Which item would reduce net income when applying the indirect method for calculating cash flows from operating activities?
If a company recognizes an increase in the provision for bad debts, how is this reflected in the cash flow statement?
If a company recognizes an increase in the provision for bad debts, how is this reflected in the cash flow statement?
Which of the following represents a cash outflow from financing activities?
Which of the following represents a cash outflow from financing activities?
Where should cash paid for preferred stock dividends be recorded on the statement of cash flows?
Where should cash paid for preferred stock dividends be recorded on the statement of cash flows?
Which of the following would not typically be considered a cash flow from operating activities?
Which of the following would not typically be considered a cash flow from operating activities?
When calculating cash flow, how does depreciation expense affect the cash flow statement using the indirect method?
When calculating cash flow, how does depreciation expense affect the cash flow statement using the indirect method?
What factor primarily affects the provision for bad debts that a banking company must account for?
What factor primarily affects the provision for bad debts that a banking company must account for?
Which of the following activities generate cash flow from investing activities?
Which of the following activities generate cash flow from investing activities?
What is the primary reason depreciation is added back to profit in the cash flow from operating activities?
What is the primary reason depreciation is added back to profit in the cash flow from operating activities?
Which cash flow activity requires a business to maintain a positive net cash flow for survival?
Which cash flow activity requires a business to maintain a positive net cash flow for survival?
Which of the following transactions would not result in a cash outflow?
Which of the following transactions would not result in a cash outflow?
Which of the following statements about cash flows is true?
Which of the following statements about cash flows is true?
In calculating cash from operating activities, how should outstanding salary expenses be treated?
In calculating cash from operating activities, how should outstanding salary expenses be treated?
Which item is not typically included as an inflow or outflow in a statement of cash flows?
Which item is not typically included as an inflow or outflow in a statement of cash flows?
If a company had a net profit of Rs.15,000 and interest received in advance increased cash from operations, what would the cash flow from operations be?
If a company had a net profit of Rs.15,000 and interest received in advance increased cash from operations, what would the cash flow from operations be?
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Study Notes
Revenue and Cash Flow Management
- Rebates on bills discounted for the period ending 31.03.2022 can be calculated at a discount rate of 8%.
- Relevant amounts for rebates are Rs.852.46, Rs.818.85, Rs.873.22, and Rs.825.45.
Provisions for Loans
- Identify sub-standard advances: secured exposure of Rs.200 lakh and unsecured of Rs.300 lakh.
- Possible provisions at applicable rates include Rs.80 lakhs, Rs.85 lakhs, Rs.90 lakhs, and Rs.95 lakhs.
Cash Flow Statement Methods
- Indirect method: Subtract gains (e.g., gain on the sale of land) from net income.
- Cash-flow items from financing activities include repurchasing common stock.
Cash Flow Activity Classification
- Cash paid for preferred stock dividends is classified under financing activities.
- Not all outflows represent cash flows; e.g., sales of assets for cash are inflows, not outflows.
Understanding Depreciation in Cash Flow
- Depreciation needs to be added back when calculating cash flow from operating activities as it is a non-cash expenditure.
Operating Cash Flow Importance
- Long-term business survival necessitates generating positive net cash flow, primarily from operating activities.
Net Cash from Operations
- Calculate cash from operations using net profit alongside interest received in advance, totaling amounts like Rs.16,000 or Rs.22,000.
Liabilities in Financial Statements
- Installments due after 12 months from the reporting date are recorded as non-current liabilities.
- Proposed dividends are considered an appropriation of profit and a deferred revenue expenditure.
Security Deposits
- For an electricity company, security deposit calculations include variables like load, load factor, and billing cycle duration.
Issuing Shares
- "FPO" stands for Follow-on Public Offer in the context of company equity issuance.
- Companies may redeem partly paid-up preference shares only after fulfilling specific conditions.
Treatment of Fixed Asset Revaluation
- Revaluation of fixed assets requires careful reporting in financial statements, particularly concerning cash flow implications.
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