Test: Cash Flow Statement - 1 - Commerce MCQ

Operating Activities include cash inflows from the company’s primary revenue-generating activities, such as sales, services, or rent received if it is part of the core business operations\

.Rent received is typically classified under operating activities because it represents income from the normal operations of a business (e.g., a company leasing out property as part of its regular activities). In the indirect method of preparing the cash flow statement, rent received is added to net profit under cash flow from operating activities when adjusting for non-cash and non-operating items.

Investing Activities include cash flows from the acquisition or sale of long-term assets (e.g., property, plant, equipment) or investments, not routine income like rent.

Therefore, the correct classification is D) Operating Activities.

Computer software is an intangible asset for a company which is shown under fixed intangible assets.

While preparing companies balance sheet trade receivables are shown without deducting the provision for doubtful debts and it is shown in the liabilities side under short term provisions.

Loose tools are shown under current assets and sub heading Inventories. Loose tools are not meant for sale.

Deferred Tax liabilities are shown under Non-current Liabilities.

Refund of income tax is the part of operating activities.

Sale of machinery is concerned with investing activities. It will be added to investing activities as proceeds from sale of machinery.

Redemption of preference shares is concerned with financing activities. It will be deducted in financing activities as cash used.

Purchase of marketable securities will make no effect on cash and cash equivalents.

Reason: Cash going and marketable securities coming --- both are part of cash and cash equivalents. At the same time there is increase and decrease in cash and cash equivalents.