SWINBURNE UNIVERSITY OF TECHNOLOGY

SARAWAK CAMPUS

FACULTY OF BUSINESS, DESIGN AND ARTS

ACC10007 FINANCIAL INFORMATION FOR

DECISION MAKING

Semester 1, 2022

Practice MCQs (Multiple Choice Questions)

Topic 3: Preparation and use of

Cash Flow Statement

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Chapter 7 (Textbook): Statement of cash flows

1. Which of the following options describes the main purpose of the statement of cash
flows?

a. To show the deficit of cash during the period

b. To provide information about the profit or loss during the accounting period
c. To show the cash balance at the end of the period
d. To provide information about the cash receipts and cash payments made during
the accounting period

2. For an entity to survive:

a. the net cash flow from financing activities should be positive.

b. the net cash flow from operating activities should be positive.
c. the net cash flow from operating activities should be negative.
d. the net cash flow from investing activities should be positive.

3. When preparing a statement of cash flows, net cash from operating activities + investing
activities + financing activities = net increase/decrease in cash for the year. What appears
next on the statement?

a. Add the beginning balance of cash for the year to determine the ending balance of
cash for the year.
b. Deduct the beginning balance of cash for the year to determine the ending balance
of cash for the year.
c. Deduct cash paid to suppliers to determine the ending balance of cash for the
year.
d. Nothing. The statement is complete.

4. Which relationship between items in the statement of cash flows (SOCF) and items in the
statement of financial position (SOFP) is not correct?

a. Cash from investing activities (SOCF); Non-current assets (SOFP).

b. Cash from financing activities (SOCF); Non-current liabilities and equity (SOFP).
c. Cash from financing activities (SOCF); Non-current assets (SOFP).
d. Cash from operating activities (SOCF); Current assets and liabilities (SOFP).

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5. In the current accounting period for Briefcases Pty, sales (calculated on an accrual basis)
are $180 000 and the cash received from sales is $215 000. Which of the following
statements is correct for Briefcases Pty?

a. Credit sales that occurred in a previous period may have been paid for in the
current period.
b. Cash sales for the period were greater than credit sales.
c. Credit sales that occurred in the current period may not yet have been paid for.
d. None of the options are correct.

6. What is the correct order of activities for the preparation of a statement of cash flows?

a. (1) Cash flows from investing activities, (2) cash flows from operating activities,
(3) cash flows from financing activities
b. (1) Cash flows from financing activities, (2) cash flows from operating activities,
(3) cash flows from investing activities
c. (1) Cash flows from investing activities, (2) cash flows from financing activities,
(3) cash flows from operating activities
d. (1) Cash flows from operating activities, (2) cash flows from investing activities,
(3) cash flows from financing activities

7. A toy manufacturing business purchases equipment worth $50 000 to be used in their
manufacturing process. What type of activity would this transaction be classified as in
the statement of cash flows?

a. Operating
b. Investing
c. Financing
d. Non-cash

8. Which section of the statement of cash flows is generally considered to be the best
measure of a company’s ability to generate cash?

a. Cash flows from operating activities

b. Cash flows from financing activities
c. Cash flows from investing activities
d. Each section gives an equal estimation

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9. Cash receipts from dividends are classified as which activity in the statement of cash
flows?

a. Financing
b. Investing
c. Operating
d. Financing or investing

10. Which of the options below is an example of a cash outflows from financing activities?

a. cash paid for the purchase of shares.

b. dividends paid to shareholders.
c. the lending of money to another business.
d. payment of income tax.

11. Which of these would not be classified as an operating activity in a statement of cash
flows?

a. Payment of interest expense

b. Cash received as payment for the purchase of goods on credit
c. Cash dividends received
d. Loan repayments

12. A reconciliation between the operating profit after tax and the net cash flow from
operating activities:

I. highlights changes in the working capital accounts from one year to the next.
II. reinforces the link between the cash received from operating activities and the
reported profit or loss for the period.
III. shows the differences in accrual transactions and cash flow.

a. I and II
b. I and III
c. II and III
d. I, II and III

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13. In which section of the statement of cash flows would the purchase of new machinery be
included?

a. Cash flows from operating activities

b. Cash flows from investing activities
c. Cash flows from financing activities
d. Purchases of new equipment items are not included in the statement of cash flows

14. An entity’s net cash flow from operating activities is important for users of the statement
of cash flows because it:

I. indicates the entity’s ability to generate cash.

II represents the entity’s cash flows from normal business operations.
III. indicates that the business is meeting its current obligations.

a. I and II
b. I and III
c. II and III
d. I, II and III

15. From the information below, the net cash flow from operating activities is:

Cash contributions from owner $8000

Receipt of bank interest $50
Dividend payment to shareholders $2500
Cash receipts from customers $4500
Cash purchase of computer $2100
Depreciation on computer $50
Cash payments to suppliers $3500

a. an inflow of $5500.
b. an inflow of $1050.
c. an outflow of $2100.
d. an inflow of $6900.

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16. If customers owe $120 000 at the beginning of the year and $95 000 at the end of the
year, and credit sales total $250 000 for the year, what is the cash received from
customers during the year?

a. $370 000
b. $275 000
c. $155 000
d. $120 000

17. The amount owing to suppliers for inventory purchases is $118 000 at the beginning of
the year and is $94 000 at the end of the year. If total credit purchases of inventory for
the year are $160 000, what is the cash paid to suppliers of inventory for the year?

a. $184 000
b. $66 000
c. $254 000
d. $278 000

18. Calculate the net cash flow from operating activities by adjusting the operating profit
after tax.

After-tax profit for the year $50 000

Depreciation 8 000
Decrease in accounts receivable 22 000
Decrease in accounts payable 13 000

a. $33 000
b. $49 000
c. $51 000
d. $67 000

19. BLP Pty’s profit after tax is $28 000 and increases in inventory and accounts receivable
total $17 000. What is BLP Pty’s net cash flow from operating activities?

a. Inflow of $11 000

b. Inflow of $45 000
c. Outflow of $11 000
d. Outflow of $45 000

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20. Blueskin Pty’s opening balance of dividends payable is $120 000, the closing balance is
$90 000 and dividends declared at the end of the period are $50 000. How much cash
was paid for dividends in that period?

a. $0
b. $20 000
c. $40 000
d. $80 000

21. Pages Pty’s opening balance of borrowings is $330 000, the closing balance is $550 000
and a total of $240 000 is paid off the entity’s borrowings during the period. How much
additional cash did Pages Pty borrow during the period?

a. $90 000
b. $120 000
c. $460 000
d. $3100 000

22. Bookchump Pty’s opening balance of accrued expenses is $34 000, the closing balance is
$38 000 and accrued expenses recognised at the end of the period are $20 000. How
much was paid for accrued expenses during the period?

a. $28 000
b. $16 000
c. $18 000
d. $14 000

23. Which of the following is not an early warning indicator of cash flow problems?

a. Operating activities are paid for using proceeds raised from the issue of shares
b. Cash received from customers is greater than cash paid to suppliers
c. Operating cash outflows
d. The entity continues to borrow more money than it repays