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Fund Flow and Cash Flow Statements Questions and Answers

1.

In relation to cash flow statement, which of the following is not regarded as a financing activity

Exam Year(s)

DSSSB - 2023,

Answer: D

Cash payments to and on behalf of employees are not a financing activity. In a cash flow statement they are part of operating activities, because they arise from running the business. Financing activities are those that change the size and make-up of owners' capital and borrowings: redemption of debentures, cash proceeds from issuing debentures and cash proceeds from issuing shares all fall under them. So the fourth option is the one that is not financing.

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2.

Which of the following is a source of fund in fund flow statement

Exam Year(s)

DSSSB - 2023,

Answer: A

A decrease in working capital is a source of funds in a fund flow statement. When the schedule of changes in working capital shows that working capital has fallen, funds have been released from it and are treated as a source, while an increase in working capital is an application of funds. Redemption of debentures, payment of dividends and tax, and funds lost through business operations are uses or applications of funds, since they take funds out of the business.

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