VIVA QUESTIONS TERM -2

23 March 2022 23:34

VIVA QUESTIONS ON PROJECT FILE

1. Give a brief description of your Project File.

Ans. My Project File consists of Specific Project on Segment Analysis.
2. What have you learnt from the Project Work ?
Ans. This Project has helped me to develop the competence of reading, analysing and interpreting
the Annual Report of the business. It has also helped to understand the Practical aspect of
Accounting.

3. Give a brief description of the Specific Project on Ratio Analysis.

Ans. A student should be well versed with your Company's ROI, RFO, Liquidity and Profitability .

4. What is meant by Journal ?

Ans. Journal is a book of Primary/ Original Entry.
5. Give a brief description of the company you have selected for Specific Project?
Ans. Name of the Company, Products/ Services offered , Founder ,CEO etc should be well known as
per your project.

6. Which Analysis tool have you used for Specific Projects?

Ans. I have used Accounting Ratios and Cash Flow Statement.

7. What is a Suspense Account?

Ans. It is the account temporarily opened while preparing Trial Balance. It remains in the books till
the errors are located and rectified.

8. What is meant by Amortisation?

Ans. It refers to economic deterioration of Intangible Assets.

9. What is meant by Statement of Profit and loss?

Ans. It is a statement prepared to ascertain the Net Profit /Net Loss of business operations.

10. What is a Balance-Sheet ? Why does the total of the Balance Sheet come equal?
Ans: It is a statement of Assets and Liabilities of a company at a given date. The Total of assets and
liabilities is always equal due to double entry system of Accounting.

VIVA QUESTIONS ON CASH FLOW STATEMENT

1. What is meant by Cash Flow Statement?
Ans. Cash Flow Statement is a statement which shows inflows and outflows of Cash and Cash
Equivalents during an accounting period.

2. What are the three Activities calculated while preparing a Cash Flow Statement?
Ans. Cash Flow from Operating Activities , Cash Flow from Investing Activities and Cash flow from
Financing Activities.

3. What is the sum of all three activities of Cash Flow Statement?

Ans. It is either Net Increase/ Decrease in Cash and Cash Equivalents.

4. What do you mean by Cash and Cash Equivalents?

Ans. Cash Equivalents are Short Term, Highly Liquid Investments which are convertible into cash
within 3 months.

5. Give examples of Cash and Cash Equivalents.

Ans. Cash on Hand
Cash at Bank
Cheques and Drafts on Hand
Short Term Investments (Marketable Securities/Current Investments)
Short Term Deposits with Bank

6. What is meant by Cash Flow?

Ans. Cash Flow are inflows and outflows of Cash and Cash Equivalents.

7. Explain inflow of cash with an example.

Ans. When a transaction results in increase in Cash and Cash Equivalents ,it is Inflow of Cash.
For example Sale of Machinery, Issue of Shares/ Debentures , Bank Loan raised etc, Cash Sales.

8. Explain outflow of cash with an example.

Ans. When a transaction results in decrease in Cash and Cash Equivalents ,it is outflow of Cash.
For example Purchase of Machinery, Redemption of Debentures ,Cash paid to Trade Payables.

9. What kind of flow of cash will happen under the following situations:
Cash deposited in bank
Cash withdrawn from bank
Sale/Purchase of marketable securities
Ans. All above transactions will result in No Flow of Cash because in all transactions one
component of cash and cash equivalent is increasing and another is decreasing.
10. How would you classify the following transactions would result in Inflow, Outflow and No Flow
of Cash and Cash Equivalents:
(i) Sale of Machinery at Profit /Loss __ Inflow

(ii) Purchase of Stock for cash __ Outflow

(iii) Cash Received from Debtors __ Inflow

(iv) Cash deposited in Bank __ No Flow

(v) Sale of Marketable Securities __ No Flow

(vi) Issue of Shares __ Inflow

(vii) Converted Debentures into shares __ No flow

(viii) Cash Paid to Trade Payables __ Outflow

(ix) Repayment of Loan taken __ Outflow

(x) Bank Overdraft raised __ Inflow

11. What do you mean by Operating Activities?

Ans. Operating Activities are the Principal Revenue Generating activities of the enterprise and
other activities of the business enterprise.

12. Give examples of Operating Activities of a company.

Ans. Cash sales
Collection from debtors
Cash Purchases
Payment to creditors
Payment of operating expenses

13. What do you mean by Investing Activities?

Ans. Investing Activities are those activities which are related to Purchase and Sale of Long Term
Assets and Long term Investments.

14. Give examples of Investing Activities.

Ans. Purchase of Tangible and Intangible Assets
Purchase and sale of Investments
Long Term and Short Term Loans and Advances
Interest and Dividend received
 Rent received.

15. What do you mean by Financing Activities?

Ans. Financing Activities are the activities which results in increase and decrease in the amount
and composition of Owners Funds and Borrowed Funds.

16. Give examples of Financing Activities.

Ans. Proceeds from Issue of Share Capital
Proceeds from Issue of Debentures
Proceeds from Bank Loan
Repayment of Bank Loan
Redemption of Debentures
Interest on Debentures and Bank Loan
Dividend Paid

17. What is Proposed Dividend?

Ans. It is the final dividend proposed by the company at the end of the year and is
approved by the . It is paid on both Equity and Preference Shares.

18. Which Accounting Standard Governs the point of Proposed Dividend ?

Ans. It is Accounting Standard 4 ( AS-4 ) which Governs the point of Proposed Dividend.

19. How to deal with the amounts of Proposed Dividend of Previous and Current year.
Ans. The last years amount is shown as Proposed Dividend Paid in Financing Activities and
The Current years amount is not to be accounted.

20. What is Interim Dividend?

Ans. It is the Dividend declared by the Board of Directors of a company before the conduct of
Annual General Meeting (AGM) of the company. It is paid on Equity Shares only.

21. Why Non Operating Incomes are subtracted and Non Operating Expenses are added to
Net Profit before Tax?
Ans. They are subtracted and added back to Net Profit in order to get the Actual Cash Generated
From Operations. Also they are shown either under Investing Activity or Financing Activity.

22. Can you give some examples of Non Cash and Non Operating Expenses.
Ans. Non Cash Expenses may include Depreciation , amortisation, Provision for doubtful debts
Non Operating Expenses may include Discount / Loss on issue of Debentures, loss on sale of
Fixed Assets, etc.

23. What do we get after adding Non Operating Non Operating Expenses and Non Operating
incomes to Net Profit before Tax?
 Ans. We get Operating Profit before Working Capital Changes.

24. How would you treat the following for a Finance Company:
(i) Interest paid on Long Term Borrowing
(ii) Interest received on Investments
(iii) Dividend received on Investments
Ans. All of the above will be shown under Operating Activities because Finance Company deals in
Financial matters only.

25. How would you treat Dividend Paid for a Finance Company and Trading Company ?
Ans. It will always be shown under Financing Activities for both the companies.

26. How would you treat the following for a Trading Company:
(i) Interest paid on Long Term Borrowing
(ii) Interest received on Investments
(iii) Dividend received on Investments

Ans. (i) Interest paid on Long Term Borrowing - Financing Activity

(ii) Interest received on Investments - Investing Activity
(iii) Dividend received on Investments- Investing Activity

27. How would you deal with the amount of Goodwill when increases and decreases from last year?
Ans. When the amount of Goodwill increases it will be shown under Investing Activities as
Goodwill Purchased.

When the amount of Goodwill decreases it will be shown as Goodwill Amortised / Written off
and will be shown as Non Cash Expense under Operating Activities.

28. Can you tell any such transaction which can be shown under Investing and Financing both
activities?
Ans. Machinery Purchased on Hire Purchase System/ Instalment basis. The Principal amount paid
instalment will be shown under Investing Activities and Interest paid with instalment will be
shown under Financing Activities.

29. How would you deal with Refund of Tax and Tax paid?
Ans. Refund of Tax will be subtracted from Surplus i.e., Balance in Statement of Profit & Loss and it
will also be subtracted from Tax Paid to get Cash Flow From Operating Activities.

Tax Paid will be subtracted from Cash Generated from Operations to get Cash Flow From
Operating Activities.

30. Can you give an example of an activity which is a Financing Activity for every type of enterprise.
 Ans. Dividend Paid

31. Loans and Advances granted by company will shown under which activity?
Ans. It will be shown under Investing Activities.

32. Increase in Short Term Borrowings of a company will be shown under which activity?
Ans. Financing Activity.

33. Sale of Marketable Securities at par will result in inflow, outflow or no flow of cash.
Ans. It will be no flow of cash.

34. Where would you show Issue of Shares for the purchase of Machinery in Cash Flow Statement?
Ans . It will not be shown in Cash Flow Statement, as it doesn't involve any flow of cash.

35. How would you deal with decrease in the amount of Securities Premium Reserve?
Ans. It will not be shown in Cash Flow Statement, as it doesn't involve any flow of cash.

36. Give any two limitations of Cash Flow Statement.

Ans. It ignores non-cash transactions as important they may be.
Its not a substitute for Profit and Loss.
37. Give any two advantages of preparing Cash Flow Statement.
Ans. It facilitates financial planning
It is very helpful in efficient cash management.
38. Under which type of activity will Rent Paid and Rent Received be classified while preparing Cash
Flow Statement?
Ans. Operating Activity and Investing Activity.
38. Loans and Advances granted by a company will be considered as which type of activity while
preparing Cash Flow Statement.
Ans. Investing Activity
39. Increase in Bank Overdraft will be shown under which activity.
Ans. It will be added under Financing Activities.
40. Where would you show the Short Term Loans and Advances in Cash Flow Statement?
Ans. It would be shown under Investing Activities.