A 'Funds Flow Statement' shows: MCQ with Answer and Explanation

A 'Funds Flow Statement' shows:
A. Profit for the year
B. Changes in working capital
C. Changes in financial position between two periods
D. Cash inflows and outflows
Answer: Option C
Solution (By JKSSB Mock Tests)
Funds flow statement explains the change in financial position (working capital) between two balance sheets.

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Practice More Accountancy and Book Keeping Questions

Question #1
Under the Income Tax Act, the 'TDS' on the sale of an immovable property (other than agricultural land) by a resident is governed by which section, and what is the rate?
A. Section 194IA at 10%
B. Section 194IA at 1%
C. Section 194C at 1%
D. Section 194J at 10%

Correct Answer: Option B


Explanation:
Section 194IA mandates TDS at 1% on the transfer of immovable property (other than agricultural land) if the consideration exceeds ₹50,00,000.

Question #2
A: EOQ (Economic Order Quantity) minimizes the total cost of inventory. R: EOQ balances ordering costs and carrying costs. Choose the correct option.
A. Both A and R are true and R is the correct explanation of A
B. A is false but R is true
C. Both A and R are true but R is NOT the correct explanation of A
D. A is true but R is false

Correct Answer: Option A


Explanation:
EOQ is the order quantity that minimizes total inventory costs. It achieves this by finding the point where total ordering costs equal total carrying costs. R correctly explains the mechanism of EOQ.

Question #3
Which of the following adjustments would not affect the net profit of a sole trader?
A. Increase in provision for doubtful debts
B. Outstanding salary
C. Interest on drawings
D. Prepaid insurance

Correct Answer: Option C


Explanation:
Interest on drawings is an appropriation of profit in sole proprietorship? Actually in sole proprietorship, drawings are not subject to interest unless specifically decided for managerial accounting. But in financial accounting for sole traders, interest on drawings is not charged to P&L. It reduces capital directly if considered. So it does not affect net profit. Others affect P&L.