Cash Flow Statement: AS-3 and Activity Types

Choose a study mode

Play Quiz
Study Flashcards
Spaced Repetition
Chat to Lesson

Podcast

Play an AI-generated podcast conversation about this lesson

Questions and Answers

The various activities operating, investing and financing classified as per _______ related to cash flow statement

  • AS—3(revised) (correct)
  • AS 5(revised)
  • AS—4(revised)
  • AS—6(revised)

Dividend Received is concerned with _______.

  • Investing Activities (correct)
  • Financing Activities
  • Operating Activities
  • None of these

'Vinod Ltd.' is carrying on a paper manufacturing business. In the current year, it purchased machinery for Rs.30,00,000; it paid salaries of Rs. 60,000 to its employees; it required funds for expansion and therefore, issued shares of Rs. 20,00,000. It earned a profit of Rs. for the current year. Find out cash flows from operating activities.

  • 8,60,000
  • 9,00,000 (correct)
  • 8,00,000
  • 20,00,000

Cash Flow Statement is also known as

<p>Statement of Changes in Financial Position on Cash basis (C)</p> Signup and view all the answers

Dividend Received is considered as operating activity when _______.

<p>Received by a finance company (A)</p> Signup and view all the answers

What is the difference between operating activity and investing activity?

<p>Operating activities relate to the primary revenue-generating activities of a business, while investing activities concern the purchase and sale of long-term assets and other investments.</p> Signup and view all the answers

Give the meaning of Cash Flow.

<p>Cash flow refers to the movement of money into and out of a company. Positive cash flow occurs when a company's liquid assets are increasing, enabling it to settle obligations, invest in its business, and return money to shareholders. Negative cash flow occurs when a company's liquid assets are decreasing.</p> Signup and view all the answers

Give two examples of Cash Equivalents.

<p>Examples of cash equivalents include treasury bills and commercial paper. Other examples include money market funds, and short-term, highly liquid investments.</p> Signup and view all the answers

"An enterprise may hold securities and loans for dealing or trading purpose in which they are similar to inventory acquired specifically for resale." Is this statement correct?

<p>True (A)</p> Signup and view all the answers

Cash flows from such activities will be classified under which type of activity while preparing cash flow statement?

<p>The cash flows from holding securities and loans for dealing or trading will be classified as operating activities since they are part of the core business operations.</p> Signup and view all the answers

Interest received on debentures would result into inflow, outflow' or no flow of cash? Give reason.

<p>Interest received on debentures would result in an inflow of cash, because the company is receiving money.</p> Signup and view all the answers

Give any five transactions belong to operating and investing activities.

<p>Operating Activities: Cash receipts from sale of goods, Cash payments to suppliers, Salaries paid to the employees. Investing Activities: Purchase of machinery, Sale of investments.</p> Signup and view all the answers

Classify Cash sale of goods in cash into cash flows from which activity?

<p>Operating Activities (C)</p> Signup and view all the answers

Classify Cash payment to acquire fixed assets into cash flows from which activity?

<p>Investing Activities (D)</p> Signup and view all the answers

Classify Cash payments from issuing shares at a premium into cash flows from which activity?

<p>Financing Activities (C)</p> Signup and view all the answers

Classify Payment of dividend into cash flows from which activity?

<p>Financing Activities (B)</p> Signup and view all the answers

Classify Interest received on Investment into cash flows from which activity?

<p>Investing Activities (B)</p> Signup and view all the answers

Classify Interest Paid on debentures into cash flows from which activity?

<p>Financing Activities (A)</p> Signup and view all the answers

Classify payment of income tax into cash flows from which activity?

<p>Operating Activities (B)</p> Signup and view all the answers

Classify Cash repayment of long term loans into cash flows from which activity?

<p>Financing Activities (D)</p> Signup and view all the answers

Classify Cash payment of salaries and wages to employees into cash flows from which activity?

<p>Operating Activities (A)</p> Signup and view all the answers

A company had following balances investment in the beginning = 34000 investment at the end = 28000 during the year, company sold 40% of its investments held in the beginning of the period at a profit of 8400. calculate cash flow form investing activity.

<p>Cash flow from investing activity = Proceeds from sale of investments - Purchase of investments. Original investment = 34000 40% sold , i.e 34000 *40/100= 13600 Profit = 8400 Sale value= 13600+8400=Rs 22000 Investment at the end = 28000 Purchase during the year = 28000+13600-34000= 7600 CF from IA = 22000 – 7600= Rs 14400 (inflow)</p> Signup and view all the answers

Flashcards

Cash Flow Statement

A financial statement that summarizes the movement of cash and cash equivalents into and out of a company.

Operating Activities

Activities related to the primary revenue-generating activities of the business.

Investing Activities

Activities related to the purchase and sale of long-term assets and other investments.

Financing Activities

Activities related to how a company is financed, including debt, equity, and dividends.

Signup and view all the flashcards

AS 3 (Revised)

Accounting Standard defining Cash Flow Statements.

Signup and view all the flashcards

Dividend Received (Finance Company)

Cash inflows from interest and dividends received are classified under operating activities for a financial company.

Signup and view all the flashcards

Statement of Changes in Financial Position (Cash Basis)

A statement presenting changes in financial position based on cash flow.

Signup and view all the flashcards

Cash Equivalents

Highly liquid investments that are easily converted to known amounts of cash and are subject to an insignificant risk of changes in value.

Signup and view all the flashcards

Examples of Cash Equivalents

Treasury bills, commercial paper, and money market funds.

Signup and view all the flashcards

Securities Held for Trading

When securities and loans are held for trading purposes, cash flows from these activities are classified under operating activities.

Signup and view all the flashcards

Interest Received on Debentures

Interest received represents an inflow when dealing with debentures.

Signup and view all the flashcards

Operating Activities Examples

Inflows: Cash received from customers. Outflows: Payments to suppliers.

Signup and view all the flashcards

Investing Activities Examples

Inflows: Sale of equipment. Outflows: Purchase of property.

Signup and view all the flashcards

Cash Flow

The movement of cash and cash equivalents both into (inflows) and out of (outflows) a business.

Signup and view all the flashcards

Financing activity

Activities that create changes in equity and debt of an organization.

Signup and view all the flashcards

Purchase of machinery

The purchase machinery used for business, cash is going from the business.

Signup and view all the flashcards

Dividend Payment

Dividend is concerned with financing activity, it is how you pay back your investors.

Signup and view all the flashcards

Buying and selling investment

Cash flow arises from the buying and selling the investment that is not part of daily business.

Signup and view all the flashcards

Salaries Expenditure

Salaries of Rs. 60,000 to its employees is concerned with expenses happened in business.

Signup and view all the flashcards

Issued Shares

Issued shares of Rs. 100000 is concerned with financing activity.

Signup and view all the flashcards

Sale of investments

Company sold 40% of its investments held in the beginning of the period at a profit of 8400, it belongs to cash flow from investing activity

Signup and view all the flashcards

Cash equivalents

Cash equivalents cannot be included in cash flow statement.

Signup and view all the flashcards

Interest paid on debentures

The company will pay money to debentures holder

Signup and view all the flashcards

Statement accounting for variation in cash

Cash flow statement is also known as statement accounting for variation in cash

Signup and view all the flashcards

Salaries expense

Cash flow arises from the salaries

Signup and view all the flashcards

Cash flow on debenture

Debenture is used to collect funds and generate cash flow

Signup and view all the flashcards

Classification of Cash flow

Cash flow should be classified into operating, investing and financing.

Signup and view all the flashcards

AS 3 (revised)

Cash flow statement is prepared as per AS 3 (revised)

Signup and view all the flashcards

No effect on cash flow

Cash may not involve in cash flow event

Signup and view all the flashcards

Cash inflow

Cash flow is inflow when selling the investment

Signup and view all the flashcards

Study Notes

  • Operating, investing, and financing activities are classified as per AS-3 (revised) in relation to the cash flow statement.
  • Dividend Received relates to Investing Activities.
  • The Cash Flow Statement is also known as 'Statement of Changes in Financial Position on Cash basis' and 'Statement accounting for variation in cash'.
  • Dividend Received is considered as operating activity when received by a finance company.
  • An enterprise may hold securities and loans for dealing or trading purposes, similar to inventory acquired for resale.
  • Cash flows from these activities will be classified under operating activity when preparing the cash flow statement.
  • Interest received on debentures results in an inflow of cash.

Cash Flow Classification

  • Cash sale of goods is an operating activity.
  • Cash payment to acquire fixed assets is an investing activity.
  • Cash payments from issuing shares at a premium is a financing activity.
  • Payment of dividend is a financing activity.
  • Interest received on investment is an investing activity.
  • Interest paid on debentures is a financing activity.
  • Payment of income tax is an operating activity.
  • Cash repayment of long-term loans is a financing activity.
  • Cash payment of salaries and wages to employees is an operating activity.

Vinod Ltd. Cash Flows

  • Vinod Ltd. is in the paper manufacturing business.
  • It purchased machinery for Rs. 30,00,000 and paid employee salaries of Rs. 60,000.
  • The company issued shares of Rs. 20,00,000 for expansion.
  • The company earned a profit during the year.

Additional Information

  • Rs. 1,00,000, 12% debentures were issued on March 31st, 2016.
  • Machinery costing Rs. 80,000, with accumulated depreciation of Rs. 40,000, was sold at a loss of Rs. 10,000 during the year.

Balance Sheet Data as of March 31, 2016 (Amounts in Rupees)

  • Share Capital: 9,00,000
  • Reserves and Surplus: 2,50,000 (Surplus i.e., Balance in the Statement of Profit and Loss: 2,50,000)
  • Long-term Borrowings: 4,50,000 (12% Debentures: 450,000)
  • Short-term Borrowings: 1,50,000 (Bank Overdraft:)
  • Short-term Provisions: 2,00,000 (Proposed Dividend:)
  • Total Equity and Liabilities: 19,50,000
  • Tangible Assets: 14,65,000 (Machinery: 16,75,000, Accumulated Depreciation: (2,10,000))
  • Intangible Assets: 1,00,000 (Goodwill:)
  • Non-current Investments: 1,50,000
  • Current Investments: 40,000
  • Inventories: 1,22,000
  • Cash and Cash Equivalents: 73,000
  • Total Assets: 19,50,000

Balance Sheet Data as of March 31, 2015 (Amounts in Rupees)

  • Share Capital: 7,00,000 Reserves and Surplus: 1,00,000 (Surplus i.e., Balance in the Statement of Profit and Loss: 1,00,000)
  • Long-term Borrowings: 3,50,000
  • Short-term Borrowings: 75,000 (Bank Overdraft: 75,000)
  • Short-term Provisions: 1,25,000 (Proposed Dividend:)
  • Total Equity and Liabilities: 13,50,000
  • Tangible Assets: 9,15,000 (Machinery: 10,55,000, Accumulated Depreciation: (1,40,000))
  • Intangible Assets: 1,50,000
  • Non-current Investments: 1,00,000
  • Current Investments: 70,000
  • Inventories: 72,000
  • Cash and Cash Equivalents: 43,000
  • Total Assets: 13,50,000

Investment Balances and Sales

  • Beginning investment balance: 34,000
  • Ending investment balance: 28,000
  • 40% of the investments held at the beginning of the period were sold.
  • The profit on the sale of investments was 8,400.

Studying That Suits You

Use AI to generate personalized quizzes and flashcards to suit your learning preferences.

Quiz Team

Related Documents

CBSE Cash Flow Statement Test Paper PDF

More Like This

Use Quizgecko on...
Browser
Open
Browser
Browser