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Question
Amongst the following, 'Payment of bonus to the employees' by an insurance company is which type of activity?
Options
Operating activity
Investing activity
Financing activity
Both operating and financing activity
Solution
Operating activity
Explanation:
Payment of bonus to the employees by an insurance company or any other company is regarded as cash flow from operating activities.
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RELATED QUESTIONS
L Ltd. had purchased machinery on deferred payment basis. During the year ended 31-3-2015 the company paid an installment of Rs.4,00,000 which included interest of Rs.4,000. Under which activity or activities payment of installment will be classified while preparing Cash flow Statement.
Give the meaning of 'Cash Flow statement'.
Does movement between items that constitute cash or cash equivalents result into cash flow? Give reason in support of your answer.
State the primary objective of preparing a Cash Flow Statement.
Following is the Balance Sheets of Thermal Power Ltd. as at 31-3-2014
| Thermal Power Ltd Balance Sheet as at 31-3-2014 |
|||
| Particulars | Note No. |
2013-2014 Rs |
2012-2013 Rs |
|
I. Equity and Liabilities 1. Shareholder’s Funds a. Share Capital b. Reserve and Surplus 2. Non - Current Liabilities a. Long-term borrowings 3. Current Liabilities a. Trade Payables b. Short-Term Provisions |
1
|
12,00,000 3,00,000
2,40,000
1,79,000 50,000 |
11,00,000 2,00,000
1,70,000
2,04,000 77,000 |
| Total | 19,69,000 | 17,51,000 | |
|
II. Assets 1. Non – Current Assets a) Fixed Assets (i) Tangible assets (ii) Intangible b) Non – Current Investments 2. Current Assets a) Current Investments b) Inventories c) Trade Receivables d)Cash and Cash |
2 3
|
10,70,000 40,000
2,40,000 1,29,000 1,70,000 3,20,000 |
8,50,000 1,12,000
1,50,000 1,21,000 1,43,000 3,75,000 |
| Total | 19,69,000 | 17,51,000 | |
Notes to Accounts
| Note No | Particulars | 31-3-2015 | 31-3-2014 |
|
1
2
3
|
Reserve and Surplus (Surplus i.e. Balance in Statement of Profit and Loss) Tangible Assets Machinery Less: Accumulated Depreciation Intangible Assets Goodwill |
3,00,000
12,70,000 (2,00,000)
40,000 |
2,00,000
10,00,000 (1,50,000)
1,12,000 |
Additional Information:
During the year a piece of machinery, costing Rs 24,000 on which accumulated depreciation was Rs 16,000, was sold for Rs 6,000.
Prepare Cash Flow Statement
Which of the following transactions will result in 'Flow of Cash’?
(a) An issue of equity shares of Rs 1, 00,000.
(b) Purchase of machinery of Rs 1,75,000.
(c) Redemption of 9% debentures Rs 3,50,000.
(d) Cash deposited into bank Rs 15,000.
While preparing Cash Flow statement of Sharda Ltd. 'Depreciation provided on fixed assets' was added to net profit to calculate cash flow from operating activities. Was the accountant correct in doing so? Give reason.
State the meaning of ‘Cash Flow’ while preparing Cash Flow Statement.
When does the flow of cash take place'?
Net increase in working capital other than cash and cash equivalents will increase, decrease or not change cash flow from operating activities. Give reason in support of your answer.
What is meant by a non-cash transaction? Give one example of a non-cash transaction.
Short Answer Question
State clearly what would constitute the operating activities for each of the follow in the following of enterprises:
(i) Hotel
(ii) Film production house
(iii) Financial enterprise
(iv) Media enterprise
(v) Steel manufacturing unit
(vi) Software development business unit.
Short Answer Question
“The nature/type of enterprise can change altogether the category into which a particular activity may be classified.” Do you agree? Illustrate your answer.
Long Answer Question
Describe the procedure to prepare Cash Flow Statement.
From the following information, prepare cash flow statement:
| Particulars | Note No. | 31st March 2015 (Rs) |
31st March 2014 (Rs) |
| I) Equity and Liabilities | |||
|
1. Shareholders’ Funds |
|||
|
a) Share capital |
7,00,000 | 5,00,000 | |
|
b) Reserves and surplus |
4,70,000 | 2,50,000 | |
|
2. Non-current Liabilities |
|||
|
(8% Debentures) |
4,00,000 | 6,00,000 | |
|
3. Current Liabilities |
|||
|
a) Trade payables |
9,00,000 | 6,00,000 | |
| Total | 24,70,000 | 19,50,000 | |
| II) Assets | |||
|
1. Non-current assets |
|||
|
a) Fixed assets |
|||
|
i) Tangible |
7,00,000 | 5,00,000 | |
|
ii) Intangible-Goodwill |
1,70,000 | 2,50,000 | |
|
2. Current assets |
|||
|
a) Inventories |
6,00,000 | 5,00,000 | |
|
b) Trade Receivables |
6,00,000 | 4,00,000 | |
|
c) Cash and cash equivalents |
4,00,000 | 3,00,000 | |
| Total | 24,70,000 | 19,50,000 |
Additional Information:
Depreciation Charge on Plant amount to Rs. 80,000.
Classify the following activity into operating activities, investing activities, financing activities or cash activities
"Proceeds from sales of old machinery"
Classify the following activity into operating activities, investing activities, financing activities or cash activities
"Proceeds from issuance of equity share capital."
Classify the following activity into operating activities, investing activities, financing activities or cash activities
"Interest and Dividend received": In case of a financial enterprise (whose main business is lending and borrowing)
As per which accounting standard, cash flows exclude movements between items that constitute cash or cash equivalents?
Expenses paid in advance at the end of the year are ______ in ______ activities while preparing the Cash Flow Statement.
