Chapter 14 Statement Of Cash Flow.pdf

Financial accounting F3 acca Practice questions Financial accounting F3 acca Practice questions Financial accounting F3 acca Practice questions

Statements of Cash Flows

Prepared for Educational Purposes

August 14, 2025

Contents

2 Part 2: Answers with Detailed Explanations 10

1

1 Part 1: List of Questions

This section contains 50 multiple-choice questions based on Statements of Cash Flows, including operating, investing, and financing activities Numbers are left-aligned from 1

to 50

1 Part of a companys Statement of Cash Flows is shown below: Operating profit 8,640, Depreciation charges (2,160), Increase in inventory (330), Increase in accounts payable

440 The following criticisms of the extract have been made: (1) Depreciation charges should have been added, not deducted (2) Increase in inventory should have been added, not deducted (3) Increase in accounts payable should have been deducted, not added Which of the criticisms are valid?

a 1 and 3 only

b 2 only

c 1 only

d 2 and 3 only

2 Which of the following items could appear in a companys Statement of Cash Flows? (1) Surplus on revaluation of non-current assets, (2) Proceeds of issue of shares, (3) Proposed dividend, (4) Dividends received

a 3 and 4

b 1 and 2

c 2 and 4

d 1 and 3

3 Which of the items below would not appear on a Statement of Cash Flows?

a The dividends paid to preferred shareholders during the year

b The purchase of long term investments

c The nominal value of debentures redeemed at par during the year

d The Statement of Profit or Loss charge for taxation for the year

4 Which of the following statements are correct? (1) A Statement of Cash Flows pre-pared using the direct method produces a different figure for operating cash flow from that produced if the indirect method is used (2) Rights issues of shares do not feature

in Statements of Cash Flows (3) A surplus on revaluation of a non-current asset will not appear as an item in a Statement of Cash Flows (4) A profit on the sale of a non-current asset will appear as an item under Cash Flows from Investing Activities

in a Statement of Cash Flows

a 3 only

b 2 and 4

c 1 and 4

d 2 and 3

5 In the course of preparing a company’s Statement of Cash Flows, the following figures are to be included in the calculation of the net cash flow from operating activities:

Depreciation charges 980,000, Profit on sale of non-current assets 40,000, Increase in inventories 130,000, Decrease in receivables 100,000, Increase in payables 80,000 The net effect of these items in the Statement of Cash Flows will be a(n)

a Increase in operating profit of $1,030,000

b Decrease in operating profit of $1,030,000

c Increase in operating profit of $990,000

d Decrease in operating profit of $990,000

6 Which of the following is classified as a cash flow from investing activities?

a Payment of dividends

b Purchase of equipment

c Issuance of shares

d Payment of taxes

7 A companys Statement of Cash Flows shows: Operating profit $5,000, Depreciation

$1,500, Decrease in inventory $200, Increase in receivables $300 What is the net cash flow from operating activities?

a $6,400

b $6,200

c $5,900

d $5,700

8 Which of the following items would appear under financing activities in a Statement

of Cash Flows?

a Sale of non-current assets

b Repayment of bank loan

c Interest received

d Depreciation expense

9 Which of the following statements is correct?

a Depreciation is deducted in the Statement of Cash Flows

b Dividends proposed are included in financing activities

c Cash flows from operating activities are always positive

d Non-cash transactions do not appear in the Statement of Cash Flows

10 A company has the following figures: Operating profit $10,000, Depreciation $2,000, Increase in payables $500, Decrease in inventories $300, Loss on sale of assets $200 What is the net cash flow from operating activities?

a $12,000

b $12,500

c $13,000

d $11,500

11 Which of the following is a non-cash item that does not appear in the Statement of Cash Flows?

a Payment of dividends

b Revaluation surplus

c Proceeds from sale of equipment

d Repayment of debentures

12 A companys Statement of Cash Flows includes: Operating profit $12,000, Deprecia-tion $3,000, Increase in receivables $400, Decrease in payables $200 What is the net cash flow from operating activities?

a $14,400

b $14,800

c $14,200

d $14,600

13 Which of the following appears under operating activities in a Statement of Cash Flows?

a Purchase of non-current assets

b Dividends paid

c Interest paid

d Proceeds from share issue

14 Which statement is true about the direct method of preparing the Statement of Cash Flows?

a It adjusts operating profit for non-cash items

b It lists actual cash receipts and payments

c It is less accurate than the indirect method

d It excludes changes in working capital

15 A company has: Operating profit $15,000, Depreciation $4,000, Decrease in receiv-ables $500, Increase in inventories $600, Loss on sale of assets $300 What is the net cash flow from operating activities?

a $19,200

b $18,600

c $19,800

d $18,900

16 Which of the following is classified as a cash flow from financing activities?

a Purchase of investments

b Payment of dividends

c Interest received

d Sale of equipment

17 A companys Statement of Cash Flows shows: Operating profit $8,000, Depreciation

$2,500, Increase in inventory $400, Decrease in payables $300 What is the net cash flow from operating activities?

a $9,800

b $9,600

c $9,400

d $9,200

18 Which of the following does not affect cash flows from operating activities?

a Increase in receivables

b Depreciation expense

c Purchase of non-current assets

d Increase in payables

19 Which statement is correct about the Statement of Cash Flows?

a It includes proposed dividends

b It shows non-cash transactions

c It reconciles profit to cash generated

d It excludes financing activities

20 A company has: Operating profit $20,000, Depreciation $5,000, Increase in receivables

$1,000, Decrease in inventories $800, Profit on sale of assets $200 What is the net cash flow from operating activities?

a $24,600

b $24,400

c $24,800

d $24,200

21 Which of the following appears under investing activities in a Statement of Cash Flows?

a Payment of taxes

b Proceeds from sale of property

c Repayment of loans

d Dividends paid

22 A companys Statement of Cash Flows includes: Operating profit $6,000, Depreciation

$1,800, Decrease in receivables $200, Increase in payables $300 What is the net cash flow from operating activities?

a $8,300

b $8,100

c $8,500

d $7,900

23 Which of the following is a non-cash transaction?

a Payment of dividends

b Issuance of bonus shares

c Purchase of equipment

d Repayment of debt

24 A company has: Operating profit $25,000, Depreciation $6,000, Increase in inventories

$700, Decrease in payables $500, Loss on sale of assets $400 What is the net cash flow from operating activities?

a $30,200

b $29,800

c $30,600

d $29,400

25 Which of the following is classified as a cash flow from operating activities?

a Purchase of shares

b Payment of taxes

c Proceeds from share issue

d Sale of investments

26 A companys Statement of Cash Flows shows: Operating profit $10,000, Depreciation

$3,000, Decrease in inventory $400, Increase in receivables $500 What is the net cash flow from operating activities?

a $12,900

b $12,700

c $13,100

d $12,500

27 Which of the following appears under financing activities in a Statement of Cash Flows?

a Purchase of non-current assets

b Interest paid

c Proceeds from issue of debentures

d Dividends received

28 Which statement is true about the indirect method of preparing the Statement of Cash Flows?

a It lists actual cash receipts and payments

b It adjusts profit for non-cash items

c It excludes working capital changes

d It is less accurate than the direct method

29 A company has: Operating profit $30,000, Depreciation $7,000, Decrease in payables

$600, Increase in receivables $800, Profit on sale of assets $300 What is the net cash flow from operating activities?

a $36,100

b $35,900

c $36,300

d $35,700

30 Which of the following is classified as a cash flow from investing activities?

a Payment of dividends

b Purchase of land

c Repayment of loans

d Interest paid

31 A companys Statement of Cash Flows shows: Operating profit $15,000, Depreciation

$4,000, Increase in inventory $500, Decrease in receivables $600 What is the net cash flow from operating activities?

a $19,100

b $18,900

c $19,300

d $18,700

32 Which of the following does not appear in the Statement of Cash Flows?

a Dividends paid

b Depreciation expense

c Proceeds from sale of equipment

d Repayment of debentures

33 A company has: Operating profit $18,000, Depreciation $5,000, Decrease in invento-ries $700, Increase in payables $400, Loss on sale of assets $200 What is the net cash flow from operating activities?

a $24,100

b $23,900

c $24,300

d $23,700

34 Which of the following is classified as a cash flow from financing activities?

a Purchase of equipment

b Proceeds from share issue

c Interest received

d Sale of property

35 A companys Statement of Cash Flows shows: Operating profit $22,000, Depreciation

$6,000, Increase in receivables $700, Decrease in payables $500 What is the net cash flow from operating activities?

a $26,800

b $26,600

c $26,400

d $26,200

36 Which of the following is a non-cash item?

a Payment of taxes

b Revaluation surplus

c Proceeds from sale of assets

d Repayment of loans

37 A company has: Operating profit $35,000, Depreciation $8,000, Decrease in receiv-ables $900, Increase in inventories $1,200, Profit on sale of assets $400 What is the net cash flow from operating activities?

a $42,300

b $42,100

c $42,500

d $41,900

38 Which of the following appears under operating activities in a Statement of Cash Flows?

a Purchase of investments

b Dividends paid

c Interest paid

d Proceeds from share issue

39 Which statement is true about the Statement of Cash Flows?

a It includes non-cash transactions

b It reconciles profit to cash generated

c It excludes operating activities

d It shows proposed dividends

40 A company has: Operating profit $40,000, Depreciation $9,000, Increase in payables

$700, Decrease in inventories $800, Loss on sale of assets $500 What is the net cash flow from operating activities?

a $50,000

b $49,800

c $50,200

d $49,600

41 Which of the following is classified as a cash flow from investing activities?

a Payment of dividends

b Purchase of machinery

c Repayment of debentures

d Interest paid

42 A companys Statement of Cash Flows shows: Operating profit $28,000, Depreciation

$7,000, Decrease in receivables $500, Increase in payables $600 What is the net cash flow from operating activities?

a $36,100

b $35,900

c $36,300

d $35,700

43 Which of the following does not appear in the Statement of Cash Flows?

a Dividends paid

b Profit on sale of assets

c Proceeds from sale of equipment

d Repayment of loans

44 A company has: Operating profit $50,000, Depreciation $10,000, Increase in invento-ries $1,500, Decrease in payables $800, Profit on sale of assets $600 What is the net cash flow from operating activities?

a $57,100

b $56,900

c $57,300

d $56,700

45 Which of the following is classified as a cash flow from financing activities?

a Purchase of land

b Proceeds from issue of shares

c Interest received

d Sale of investments

46 A companys Statement of Cash Flows shows: Operating profit $45,000, Depreciation

$8,000, Decrease in inventories $900, Increase in receivables $1,200 What is the net cash flow from operating activities?

a $52,700

b $52,500

c $52,900

d $52,300

47 Which of the following is a non-cash item?

a Payment of dividends

b Depreciation expense

c Proceeds from sale of assets

d Repayment of debt

48 A company has: Operating profit $60,000, Depreciation $12,000, Increase in payables

$1,000, Decrease in receivables $800, Loss on sale of assets $700 What is the net cash flow from operating activities?

a $74,500

b $74,300

c $74,700

d $74,100

49 Which of the following appears under investing activities in a Statement of Cash Flows?

a Payment of taxes

b Purchase of property

c Repayment of loans

d Dividends paid

50 Which statement is true about the direct method of preparing the Statement of Cash Flows?

a It adjusts profit for non-cash items

b It lists actual cash receipts and payments

c It excludes financing activities

d It is less accurate than the indirect method

51 A company has: Operating profit $70,000, Depreciation $15,000, Increase in invento-ries $2,000, Decrease in payables $1,500, Profit on sale of assets $800 What is the net cash flow from operating activities?

a $80,700

b $80,500

c $80,900

d $80,300

52 Which of the following is classified as a cash flow from financing activities?

a Purchase of equipment

b Proceeds from issue of debentures

c Interest received

d Sale of property

53 A companys Statement of Cash Flows shows: Operating profit $55,000, Depreciation

$10,000, Decrease in receivables $1,200, Increase in payables $800 What is the net cash flow from operating activities?

a $67,000

b $66,800

c $67,200

d $66,600

2 Part 2: Answers with Detailed Explanations

1 a 1 and 3 only Explanation: Depreciation (non-cash) is added back, not deducted

(criticism 1 valid) Increase in inventory is correctly deducted (criticism 2 invalid) Increase in payables is correctly added (criticism 3 invalid)

2 c 2 and 4 Explanation: Proceeds of share issue (financing) and dividends received

(operating) are cash flows Revaluation surplus and proposed dividends are non-cash items

3 d The Statement of Profit or Loss charge for taxation for the year Explanation:

Tax charge is a non-cash expense; only cash paid for taxes appears in the Statement

of Cash Flows

4 a 3 only Explanation: Revaluation surplus (3) is non-cash and does not appear.

Direct and indirect methods give the same operating cash flow (1 false) Rights issues are financing activities (2 false) Profit on asset sale is adjusted in operating activities, not investing (4 false)

5 a Increase in operating profit of $1,030,000 Explanation: Depreciation $980,000

(add), Profit on sale $40,000 (deduct), Increase in inventories $130,000 (deduct), De-crease in receivables $100,000 (add), InDe-crease in payables $80,000 (add) Net: $980,000

- $40,000 - $130,000 + $100,000 + $80,000 = $1,030,000

6 b Purchase of equipment Explanation: Purchase of equipment is an investing

activity (IAS 7)

7 a $6,400 Explanation: Operating profit $5,000 + Depreciation $1,500 + Decrease

in inventory $200 - Increase in receivables $300 = $6,400

8 b Repayment of bank loan Explanation: Repayment of bank loan is a financing

activity (IAS 7)

9 d Non-cash transactions do not appear in the Statement of Cash Flows Explana-tion: Non-cash transactions (e.g., depreciation, revaluation) are excluded from the

Statement of Cash Flows

10 b $12,500 Explanation: Operating profit $10,000 + Depreciation $2,000 + Increase

in payables $500 + Decrease in inventories $300 + Loss on sale $200 = $12,500.

11 b Revaluation surplus Explanation: Revaluation surplus is a non-cash item and

does not appear in the Statement of Cash Flows

12 a $14,400 Explanation: Operating profit $12,000 + Depreciation $3,000 - Increase

in receivables $400 - Decrease in payables $200 = $14,400

13 c Interest paid Explanation: Interest paid is an operating activity (IAS 7).

14 b It lists actual cash receipts and payments Explanation: The direct method lists

actual cash receipts and payments for operating activities (IAS 7)

15 a $19,200 Explanation: Operating profit $15,000 + Depreciation $4,000 + Decrease

in receivables $500 - Increase in inventories $600 + Loss on sale $300 = $19,200

16 b Payment of dividends Explanation: Payment of dividends is a financing activity

(IAS 7)

17 a $9,800 Explanation: Operating profit $8,000 + Depreciation $2,500 - Increase in

inventory $400 - Decrease in payables $300 = $9,800

18 c Purchase of non-current assets Explanation: Purchase of non-current assets is an

investing activity, not operating

19 c It reconciles profit to cash generated Explanation: The Statement of Cash Flows

(indirect method) reconciles profit to cash generated (IAS 7)

20 a $24,600 Explanation: Operating profit $20,000 + Depreciation $5,000 - Increase

in receivables $1,000 + Decrease in inventories $800 - Profit on sale $200 = $24,600

21 b Proceeds from sale of property Explanation: Proceeds from sale of property are

an investing activity (IAS 7)

22 a $8,300 Explanation: Operating profit $6,000 + Depreciation $1,800 + Decrease

in receivables $200 + Increase in payables $300 = $8,300

23 b Issuance of bonus shares Explanation: Issuance of bonus shares is a non-cash

transaction and does not appear in the Statement of Cash Flows

24 a $30,200 Explanation: Operating profit $25,000 + Depreciation $6,000 - Increase

in inventories $700 - Decrease in payables $500 + Loss on sale $400 = $30,200

25 b Payment of taxes Explanation: Payment of taxes is an operating activity (IAS

7)

26 a $12,900 Explanation: Operating profit $10,000 + Depreciation $3,000 + Decrease

in inventory $400 - Increase in receivables $500 = $12,900

27 c Proceeds from issue of debentures Explanation: Proceeds from issue of debentures

are a financing activity (IAS 7)

28 b It adjusts profit for non-cash items Explanation: The indirect method adjusts

profit for non-cash items and working capital changes (IAS 7)

29 a $36,100 Explanation: Operating profit $30,000 + Depreciation $7,000 - Decrease

in payables $600 - Increase in receivables $800 - Profit on sale $300 = $36,100

30 b Purchase of land Explanation: Purchase of land is an investing activity (IAS 7).