CUET UG Categorised PYQ Accountancy Unit 10 -

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CUET UG Categorised PYQ Accountancy Unit 10

Accountancy

⏱️ 30 Minutes

❓ 31 Questions

📅 2022, 2023, 2024 & 2025

✍️ Long Answers

📌 Answers are locked once submitted — results and explanations appear at the end.

CUET UG Categorised PYQ Accountancy Unit 10

1 / 31

QUESTION 1 OF 31

Match List I with List II:

LIST I	LIST II
A. Cash Equivalents	I. Interim Dividend paid
B. Financing Activities	II. Selling & Distribution expenses paid
C. Operating Activities	III. Marketable securities
D. Investing Activities	IV. Dividend received on Shares held as investment

Answer Review

1 Match List I with List II:

LIST I	LIST II
A. Cash Equivalents	I. Interim Dividend paid
B. Financing Activities	II. Selling & Distribution expenses paid
C. Operating Activities	III. Marketable securities
D. Investing Activities	IV. Dividend received on Shares held as investment

A A-IV, B-I, C-II, D-III

B A-III, B-I, C-II, D-IV

C A-III, B-IV, C-II, D-I

D A-III, B-IV, C-I, D-II

💡 Short Explanation

Cash Equivalents are highly liquid investments (Marketable Securities). Financing involves changes in capital/borrowing (Dividend paid). Operating involves day-to-day business activities (Expenses paid). Investing involves long-term assets and investments (Dividend received).

✅ Correct Answer Explanation

(Detailed) As per AS-3 (Cash Flow Statement): • A-III: Marketable Securities are short-term, highly liquid investments readily convertible into known amounts of cash. • B-I: Interim Dividend Paid relates to changes in capital structure and is a Financing Activity. • C-II: Selling & Distribution Expenses Paid arise from principal revenue-generating activities and are Operating Activities. • D-IV: Dividend Received on Shares held as Investment is a return on investment and is classified as an Investing Activity. Therefore: A-III, B-I, C-II, D-IV.

❓ Why Other Options Are Incorrect

A) A-IV, B-I, C-II, D-III
Incorrectly matches Cash Equivalents with Dividend Received.
C) A-III, B-IV, C-II, D-I
Incorrectly classifies Dividend Received as Financing Activity.
D) A-III, B-IV, C-I, D-II
Incorrectly swaps Operating and Investing Activities.

🎯 Strategy

Used

Dimensional/Unit Analysis
Dividend Paid = Financing.
Dividend Received = Investing.
Marketable Securities = Cash Equivalents.
Final Answer → B.

🧠 Memory Trick

Receive = Invest

📚 Class XII, Accountancy Part II, Chapter 6: Cash Flow Statement, Section: Classification of Activities.

2 If debentures are converted into equity shares, it is a/an: (PYQ 2022)

A Inflow of cash

B No flow of cash

C Outflow of cash

D Cash and Cash equivalents

💡 Short Explanation

Conversion is a non-cash transaction. Debentures decrease and Equity Share Capital increases. No cash is received or paid.

✅ Correct Answer Explanation

(Detailed) Cash Flow Statements record only transactions involving actual movement of cash or cash equivalents. When Debentures are converted into Equity Shares: • Liability decreases. • Share Capital increases. • No cash enters or leaves the business. Therefore, it is a Non-Cash Financing Activity and is disclosed separately in notes rather than in the Cash Flow Statement itself.

❓ Why Other Options Are Incorrect

A) Inflow of cash
No cash is received.
C) Outflow of cash
No cash is paid.
D) Cash and Cash Equivalents
This is a category of assets, not a type of cash flow.

🎯 Strategy

Used

Odd One Out
Options A and C involve actual cash movement.
Option B involves only accounting adjustments.
Final Answer → B.

🧠 Memory Trick

(Paper exchanged for Paper, not Cash.)

📚 Class XII, Accountancy Part II, Chapter 6: Cash Flow Statement, Section: Non-Cash Transactions.

3 If net profit made during the year are ₹50,000 and the Bills Receivable have decreased by ₹10,000 during the year then the Cash Flow from Operating Activities will be: (PYQ 2022)

A ₹40,000

B ₹60,000

C ₹30,000

D ₹20,000

💡 Short Explanation

Net Profit = ₹50,000 Decrease in Bills Receivable = ₹10,000 Decrease in Current Asset = Cash Inflow Therefore, add ₹10,000.

✅ Correct Answer Explanation

(Detailed) Under the Indirect Method: Cash Flow from Operating Activities = Net Profit ± Working Capital Adjustments Bills Receivable is a Current Asset. Decrease in Bills Receivable = ₹10,000 A decrease in Current Assets indicates that cash has been realized. Therefore: Cash Flow from Operating Activities = ₹50,000 + ₹10,000 = ₹60,000

❓ Why Other Options Are Incorrect

A) ₹40,000
Incorrectly subtracts the decrease in Current Asset.
C) ₹30,000
No valid calculation supports this figure.
D) ₹20,000
No valid calculation supports this figure.

🎯 Strategy

Used

Substitution
Asset ↓ = Add
Asset ↑ = Subtract
Final Answer → B.

🧠 Memory Trick

Asset Decrease = Add

📚 Class XII, Accountancy Part II, Chapter 6: Cash Flow Statement, Section: Indirect Method.

4 If the net profit earned during the year is ₹1,00,000 and the amount of Bills Receivable in the beginning and the end of the year is ₹20,000 and ₹40,000 respectively, then Cash Flow from Operating Activities will be: (PYQ 2022)

A ₹60,000

B ₹1,00,000

C ₹80,000

D ₹1,20,000

💡 Short Explanation

Bills Receivable increased by ₹20,000. Increase in Current Asset = Cash Outflow. Therefore subtract ₹20,000.

✅ Correct Answer Explanation

(Detailed) Opening Bills Receivable = ₹20,000 Closing Bills Receivable = ₹40,000 Increase = ₹20,000 Cash Flow from Operating Activities = Net Profit − Increase in Current Asset = ₹1,00,000 − ₹20,000 = ₹80,000 Therefore, Cash Flow from Operating Activities = ₹80,000.

❓ Why Other Options Are Incorrect

A) ₹60,000
Incorrect calculation.
B) ₹1,00,000
Ignores working capital adjustment.
D) ₹1,20,000
Incorrectly adds increase in Current Asset.

🎯 Strategy

Used

Substitution
Asset ↑ = Subtract
Asset ↓ = Add
Final Answer → C.

🧠 Memory Trick

If Assets go UP, Cash goes DOWN.

📚 Class XII, Accountancy Part II, Chapter 6: Cash Flow Statement, Section: Indirect Method (Working Capital Adjustments).

5 Sale of Copyrights are considered as a part of: (PYQ 2022)

A Investing Activities

B Financing Activities

C Operating Activities

D Financing & Operating Activities

💡 Short Explanation

Copyrights are Intangible Fixed Assets. Sale of Fixed Assets results in Investing Cash Flow. Cash received from disposal is Investing Inflow.

✅ Correct Answer Explanation

(Detailed) According to AS-3, Investing Activities include: • Purchase of Fixed Assets • Sale of Fixed Assets • Purchase/Sale of Investments Copyrights are Intangible Non-Current Assets. When they are sold: • Cash is received. • Long-term asset is disposed of. Therefore, the transaction is classified as an Investing Activity.

❓ Why Other Options Are Incorrect

B) Financing Activities
Relates to capital and borrowings.
C) Operating Activities
Relates to principal revenue-generating activities.
D) Financing & Operating Activities
Copyright sale is purely Investing Activity.

🎯 Strategy

Used

Dimensional/Unit Analysis
Asset Purchase/Sale = Investing
Borrowing/Capital = Financing
Revenue/Expenses = Operating
Final Answer → A.

🧠 Memory Trick

Assets = Investing.

📚 Class XII, Accountancy Part II, Chapter 6: Cash Flow Statement, Section: Classification of Activities.

6 Match List I with List II in context of Cash Flow Statement:

LIST I	LIST II
A. Sale of Fixed Asset	I. Outflow in Operating Activities
B. Purchase of Goodwill	II. Inflow in Investing Activities
C. Tax Paid	III. Outflow in Investing Activities
D. Dividend Paid	IV. Outflow in Financing Activities

A A-II, B-I, C-IV, D-III

B A-II, B-III, C-I, D-IV

C A-II, B-I, C-III, D-IV

D A-III, B-II, C-IV, D-I

💡 Short Explanation

Sale of Fixed Asset = Investing Inflow. Purchase of Goodwill = Investing Outflow. Tax Paid = Operating Outflow. Dividend Paid = Financing Outflow.

✅ Correct Answer Explanation

(Detailed) Under AS-3: • A-II: Sale of Fixed Asset → Inflow in Investing Activities. • B-III: Purchase of Goodwill → Outflow in Investing Activities. • C-I: Tax Paid → Outflow in Operating Activities. • D-IV: Dividend Paid → Outflow in Financing Activities. Therefore: A-II, B-III, C-I, D-IV.

❓ Why Other Options Are Incorrect

A) A-II, B-I, C-IV, D-III
Misclassifies Goodwill and Dividend.
C) A-II, B-I, C-III, D-IV
Misclassifies Goodwill and Tax Paid.
D) A-III, B-II, C-IV, D-I
Reverses Investing Inflow/Outflow classifications.

🎯 Strategy

Used

Substitution
Fixed Asset Sale = Investing Inflow.
Goodwill Purchase = Investing Outflow.
Tax Paid = Operating.
Dividend Paid = Financing.
Final Answer → B.

🧠 Memory Trick

Funds/Capital = Financing

📚 Class XII, Accountancy Part II, Chapter 6: Cash Flow Statement, Section: Classification of Activities.

7 From the following Particulars, calculate Cash Flow from Investing Activities:
A plot of land been purchased for investment purpose and was let out for commercial use and rent received ₹30,000, Interest paid on debentures ₹60,000, Purchase of Plant ₹4,40,000, Goodwill written off ₹20,000, Sale of Land ₹5,00,000. (PYQ 2023)

A ₹70,000

B ₹1,50,000

C ₹30,000

D ₹90,000

💡 Short Explanation

Sale of Land = Inflow. Rent from investment property = Inflow. Purchase of Plant = Outflow. Interest Paid and Goodwill Written Off are ignored for Investing Activities.

✅ Correct Answer Explanation

(Detailed) Investing Activities: • Sale of Land = +₹5,00,000 • Rent Received = +₹30,000 • Purchase of Plant = −₹4,40,000 Net Cash Flow from Investing Activities: ₹5,00,000 + ₹30,000 − ₹4,40,000 = ₹90,000

❓ Why Other Options Are Incorrect

A) ₹70,000
Incorrect inclusion/exclusion of items.
B) ₹1,50,000
Incorrect classification of activities.
C) ₹30,000
Considers only Rent Received.

🎯 Strategy

Used

Option Grouping (Category Sorting)
Investing → Sale, Purchase, Investment Income.
Financing → Interest Paid.
Operating → Non-cash Adjustments.

🧠 Memory Trick

Invest = Buy/Sell Assets + Income from Investments

📚 Class 12, Accountancy Part 2, Chapter 6: Cash Flow Statement (Section 6.4).

8 Which of the following item is not considered as Cash and Cash Equivalent? (PYQ 2023)

A Treasury Bills

B Commercial Papers

C Marketable Securities

D Bills of Exchange

💡 Short Explanation

Cash Equivalents are highly liquid, short-term investments. They must be readily convertible into known amounts of cash. Generally have a maturity period of three months or less.

✅ Correct Answer Explanation

(Detailed) According to AS-3 (Cash Flow Statements), Cash Equivalents are held for meeting short-term cash commitments rather than for investment purposes. • Treasury Bills qualify as Cash Equivalents. • Commercial Papers qualify as Cash Equivalents. • Marketable Securities may qualify as Cash Equivalents. • Bills of Exchange are trade credit instruments and are not treated as Cash Equivalents. Therefore, Bills of Exchange is not considered a Cash and Cash Equivalent item.

❓ Why Other Options Are Incorrect

A) Treasury Bills
Highly liquid government securities.
B) Commercial Papers
Short-term market instruments.
C) Marketable Securities
Easily convertible into cash.

🎯 Strategy

Used

Elimination
A, B and C satisfy liquidity requirements.
D does not satisfy Cash Equivalent classification.

🧠 Memory Trick

Cash Equivalent = Investment, Not Trade Credit

📚 Class 12, Accountancy Part 2, Chapter 6: Cash Flow Statement (Section 6.2.1).

9 Royan Ltd. issued 1,00,000 9% Debentures of ₹100 each to public. Issue was subscribed. The amount will be shown as: (PYQ 2023)

A Operating Activity

B Investing Activity

C Financing Activity

D Cash and Cash Equivalent

💡 Short Explanation

Debentures are long-term borrowings. Raising borrowings is a Financing Activity.

✅ Correct Answer Explanation

(Detailed) Issue of Debentures increases long-term debt of the company. According to AS-3: • Cash received from issue of Debentures is classified as a Financing Activity because it changes the borrowing structure of the company. Therefore, the correct answer is Financing Activity.

❓ Why Other Options Are Incorrect

A) Operating Activity
Related to day-to-day business operations.
B) Investing Activity
Related to purchase/sale of long-term assets.
D) Cash and Cash Equivalent
Asset classification, not an activity classification.

🎯 Strategy

Used

Classification Method
Debt Raising → Financing Activity

🧠 Memory Trick

Debt = Financing

📚 Class 12, Accountancy Part 2, Chapter 6: Cash Flow Statement.

10 Given below are the extracts of information from Financial Statements of Zucca Ltd.

Particulars	2020–21 — 2021–22
Reserve and Surplus (Statement of Profit and Loss)	₹4,00,000 — ₹7,00,000
Dividend Payable	— — ₹40,000

Calculate amount of Net Profit after Tax, if an Interim Dividend of ₹2,00,000 was declared and paid. (PYQ 2023)

A ₹3,00,000

B ₹5,00,000

C ₹4,60,000

D ₹5,40,000

💡 Short Explanation

Increase in Reserve & Surplus = ₹3,00,000. Interim Dividend reduces reserves. Add Dividend back to determine actual profit.

✅ Correct Answer Explanation

(Detailed) Step 1: Calculate Increase in Reserve & Surplus ₹7,00,000 − ₹4,00,000 = ₹3,00,000 Step 2: Add Interim Dividend Paid ₹3,00,000 + ₹2,00,000 = ₹5,00,000 Therefore, Net Profit after Tax = ₹5,00,000.

❓ Why Other Options Are Incorrect

A) ₹3,00,000
Ignores Interim Dividend Paid.
C) ₹4,60,000
Incorrect adjustment involving Dividend Payable.
D) ₹5,40,000
Incorrectly adds Dividend Payable also.

🎯 Strategy

Used

Substitution/Calculation
Net Profit = Increase in Reserve & Surplus + Interim Dividend

🧠 Memory Trick

Profit = Reserve Increase + Dividend Distributed

📚 Class 12, Accountancy Part 2, Chapter 6: Cash Flow Statement.

11 As per AS-3 (Revised), while preparing Cash Flow Statement the correct sequence to be followed is:
A. Calculation of Cash Flow from Financing Activities
B. Calculation of Cash Flow from Operating Activities
C. Calculation of Cash Flow from Investing Activities
D. Calculation of Net Changes in Cash and Cash Equivalents during the year
E. Calculation of Net Profit before Tax and Extraordinary Items
Choose the correct answer from the options given below: (PYQ 2023)

A A, C, B, D, E

B E, B, C, A, D

C E, B, A, C, D

D D, C, B, A, E

💡 Short Explanation

Start with Net Profit Before Tax. Then Operating Activities. Then Investing Activities. Then Financing Activities. Finally determine Net Change in Cash.

✅ Correct Answer Explanation

(Detailed) The standard AS-3 sequence is: E – Net Profit Before Tax B – Operating Activities C – Investing Activities A – Financing Activities D – Net Change in Cash and Cash Equivalents Therefore: E → B → C → A → D

❓ Why Other Options Are Incorrect

A) A, C, B, D, E
Begins with Financing Activities.
C) E, B, A, C, D
Reverses Investing and Financing Activities.
D) D, C, B, A, E
Starts with the final result.

🎯 Strategy

Used

Chronological Sequencing
Profit → Operating → Investing → Financing → Net Change

🧠 Memory Trick

Profit → Operating → Investing → Financing

📚 Class 12, Accountancy Part 2, Chapter 6: Cash Flow Statement.

12 Match List I with List II:

List I	List II
A. Operating Activities	I. Depreciation
B. Investing Activities	II. Cash Paid to Supplierd
C. Financing Activities	III. Sale of Lan
D. Non-Cash Item	IV. Increase in Share Capital

A A-II, B-III, C-I, D-IV

B A-I, B-III, C-IV, D-II

C A-I, B-II, C-IV, D-III

D A-II, B-III, C-IV, D-I

💡 Short Explanation

Operating → Cash Paid to Suppliers. Investing → Sale of Land. Financing → Increase in Share Capital. Non-Cash → Depreciation.

✅ Correct Answer Explanation

(Detailed) Correct Classification: • Operating Activities → Cash Paid to Supplier • Investing Activities → Sale of Land • Financing Activities → Increase in Share Capital • Non-Cash Item → Depreciation Therefore: A-II, B-III, C-IV, D-I.

❓ Why Other Options Are Incorrect

They incorrectly classify Depreciation, Investing Activities and Financing Activities.

🎯 Strategy

Used

Matching
Operating = Suppliers
Investing = Asset Sale
Financing = Share Capital
Non-Cash = Depreciation

🧠 Memory Trick

Suppliers → Assets → Capital → Depreciation

📚 Class 12, Accountancy Part 2, Chapter 6: Cash Flow Statement.

13 Arrange the following in the context of Cash Flow Statement:
A. Operating
B. Financing
C. Net Increase/Decrease
D. Investing
E. Net Profit Before Tax
(PYQ 2023)

A D, A, B, E, C

B C, D, B, A, E

C A, E, B, D, C

D E, A, D, B, C

💡 Short Explanation

Cash Flow Statement starts with Net Profit Before Tax. Operating Activities are prepared first. Net Increase/Decrease is the final result.

✅ Correct Answer Explanation

(Detailed) Preparation Sequence: • Net Profit Before Tax (E) • Operating Activities (A) • Investing Activities (D) • Financing Activities (B) • Net Increase/Decrease (C) Therefore: E → A → D → B → C

❓ Why Other Options Are Incorrect

A) D, A, B, E, C
Starts with Investing Activities.
B) C, D, B, A, E
Starts with the final result.
C) A, E, B, D, C
Places Profit after Operating Activities.

🎯 Strategy

Used

Elimination
Start with Net Profit Before Tax.
End with Net Increase/Decrease.
Only Option D satisfies both.

🧠 Memory Trick

Earnings → Operating → Investing → Financing → Conclusion

📚 Class XII, Accountancy Part II, Chapter 6: Cash Flow Statement.

14 Match List I with List II

LIST I	LIST II
A. Employee benefit expenses	I. Investing Activity
B. Dividend received	II. Operating Activity
C. Loan raised	III. Extraordinary Item
D. Proceeds from disaster management	IV. Financing Activity

A A-III, B-II, C-I, D-IV

B A-IV, B-III, C-II, D-I

C A-II, B-I, C-IV, D-III

D A-I, B-IV, C-III, D-II

💡 Short Explanation

Operating Activities relate to principal revenue-generating activities. Investing Activities relate to investments and long-term assets. Financing Activities relate to borrowings and capital structure.

✅ Correct Answer Explanation

(Detailed) → A-II: Employee Benefit Expenses are part of normal business operations and therefore classified as Operating Activities. → B-I: Dividend Received arises from investments held by the company and is classified as an Investing Activity. → C-IV: Loan Raised changes the borrowing structure of the business and is therefore a Financing Activity. → D-III: Proceeds from Disaster Management are unusual and non-recurring in nature and are treated as Extraordinary Items. Therefore: A-II, B-I, C-IV, D-III.

❓ Why Other Options Are Incorrect

A) A-III, B-II, C-I, D-IV
Incorrectly classifies Employee Benefit Expenses and Loan Raised.
B) A-IV, B-III, C-II, D-I
Incorrectly classifies Employee Benefit Expenses, Dividend Received and Loan Raised.
D) A-I, B-IV, C-III, D-II
Incorrectly classifies all major activities.

🎯 Strategy

Used

Elimination
Loan Raised must be Financing Activity (IV).
Only Option C correctly matches C-IV.
Employee Benefit Expenses must be Operating Activity (II), confirming Option C.

🧠 Memory Trick

"Work = Operating, Invest = Dividend, Borrow = Financing."

📚 Class XII, Accountancy Part II – Chapter 6: Cash Flow Statement.

15 Calculate Cash Paid for Inventory based on the given data. (PYQ 2023)

A ₹1,59,000

B ₹1,60,000

C ₹1,59,500

D ₹1,60,500

💡 Short Explanation

Cash Paid depends on Purchases and Trade Payables. Opening Payables + Credit Purchases − Closing Payables = Cash Paid. Inventory figures are not required if Purchases are already given. (Note: Question refers to additional data present in original paper: Opening Payables ₹14,000, Credit Purchases ₹1,60,000, Closing Payables ₹14,500.)

✅ Correct Answer Explanation

(Detailed) Formula: Cash Paid = Opening Trade Payables + Credit Purchases − Closing Trade Payables Calculation: = ₹14,000 + ₹1,60,000 − ₹14,500 = ₹1,74,000 − ₹14,500 = ₹1,59,500 Therefore, the correct answer is ₹1,59,500.

❓ Why Other Options Are Incorrect

A) ₹1,59,000
Ignores Opening Payables adjustment.
B) ₹1,60,000
Simply equals Purchases and ignores Creditors.
D) ₹1,60,500
Obtained through incorrect payable adjustment.

🎯 Strategy

Used

Dimensional/Unit Analysis
Payables increased by ₹500.
Increase in Payables means ₹500 less cash was paid.
Therefore:

🧠 Memory Trick

"Payables UP = Cash DOWN; Payables DOWN = Cash UP."

📚 Class XII, Accountancy Part II – Chapter 6: Cash Flow Statement (Operating Activities).

16 Calculate Cash Flow from Financing Activities from the following information:
• Buy Back of Own Shares: ₹1,00,000
• Issue of Bonus Shares: ₹50,000
• Current Year Proposed Dividend: ₹40,000
• Previous Year Proposed Dividend: ₹10,000
(PYQ 2024)

A Outflow of ₹40,000

B Outflow of ₹1,10,000

C Outflow of ₹90,000

D Outflow of ₹1,00,000

💡 Short Explanation

Buy Back of Shares is a cash outflow. Bonus Shares are a non-cash transaction. Only Previous Year's Proposed Dividend is paid during the current year.

✅ Correct Answer Explanation

(Detailed) Step 1: Identify Cash Flows • Buy Back of Own Shares = ₹1,00,000 (Outflow) • Issue of Bonus Shares = No Cash Flow • Current Year Proposed Dividend = Ignore • Previous Year Proposed Dividend = ₹10,000 (Outflow) Step 2: Calculate Total Financing Cash Flow Total Cash Outflow = ₹1,00,000 + ₹10,000 = ₹1,10,000 Therefore, Cash Flow from Financing Activities = Outflow of ₹1,10,000.

❓ Why Other Options Are Incorrect

A) Outflow of ₹40,000
Considers only Current Year Proposed Dividend.
C) Outflow of ₹90,000
Incorrect calculation.
D) Outflow of ₹1,00,000
Ignores Previous Year's Dividend Payment.

🎯 Strategy

Used

Substitution/Calculation
Include actual cash flows only.
Exclude Bonus Issue.
Add Buy Back and Previous Year's Dividend.

🧠 Memory Trick

Previous Year's Dividend = Paid This Year

📚 Class 12, Accountancy Part II, Chapter 6: Cash Flow Statement, Section: Financing Activities.

17 Which Accounting Standard governs preparation of Cash Flow Statement? (PYQ 2024)

A AS-3 (Revised)

B AS-26

C AS-10

D AS-16

💡 Short Explanation

AS-3 specifically deals with Cash Flow Statements. It classifies cash flows into Operating, Investing and Financing Activities.

✅ Correct Answer Explanation

(Detailed) AS-3 (Revised), issued by ICAI, prescribes the preparation and presentation of Cash Flow Statements. It requires classification of cash flows into: • Operating Activities • Investing Activities • Financing Activities This helps users understand changes in Cash and Cash Equivalents during the accounting period.

❓ Why Other Options Are Incorrect

B) AS-26
Intangible Assets.
C) AS-10
Property, Plant and Equipment (Fixed Assets).
D) AS-16
Borrowing Costs.

🎯 Strategy

Used

Contextual/Tonal Matching
Cash Flow Statement is directly governed by AS-3.

🧠 Memory Trick

3 Categories of Cash Flow = AS-3

📚 Class 12, Accountancy Part II, Chapter 6: Cash Flow Statement.

18 An investment normally qualifies as Cash Equivalents only when it has a short maturity of ________ or less from the date of acquisition. (PYQ 2024)

A 12 months

B 3 months

C 6 months

D 9 months

💡 Short Explanation

Cash Equivalents must be highly liquid. AS-3 defines short maturity as 3 months or less.

✅ Correct Answer Explanation

(Detailed) According to AS-3 (Revised), Cash Equivalents are short-term, highly liquid investments that: • Are readily convertible into known amounts of cash. • Carry insignificant risk of value changes. An investment qualifies as a Cash Equivalent only if its maturity is three months or less from the date of acquisition.

❓ Why Other Options Are Incorrect

A) 12 months
Definition of Current Assets, not Cash Equivalents.
C) 6 months
Exceeds AS-3 limit.
D) 9 months
Not considered Cash Equivalent under AS-3.

🎯 Strategy

Used

Definition Recall
AS-3 specifically prescribes 3 months.

🧠 Memory Trick

Cash Equivalent = Quarter-Year Investment

📚 Class 12, Accountancy Part II, Chapter 6: Cash Flow Statement, Section: Meaning of Cash and Cash Equivalents.

19 Match List-I with List-II.

List-I	List-II
A. Income Tax Paid	I. Operating Activity
B. Dividend Received	II. Financing Activity
C. Loan Repaid	III. Investing Activity
D. Shares Issued against Machinery	IV. Not a Cash Flow Activity

A (A)-(I), (B)-(II), (C)-(III), (D)-(IV)

B (A)-(I), (B)-(III), (C)-(II), (D)-(IV)

C (A)-(I), (B)-(II), (C)-(IV), (D)-(III)

D (A)-(III), (B)-(IV), (C)-(I), (D)-(II)

💡 Short Explanation

Income Tax Paid → Operating Activity Dividend Received → Investing Activity Loan Repaid → Financing Activity Shares Issued against Machinery → Non-Cash Activity

✅ Correct Answer Explanation

(Detailed) According to AS-3: • Income Tax Paid → Operating Activity • Dividend Received → Investing Activity • Loan Repaid → Financing Activity • Shares Issued against Machinery → No cash movement occurs, therefore Not a Cash Flow Activity Hence: (A)-(I), (B)-(III), (C)-(II), (D)-(IV)

❓ Why Other Options Are Incorrect

A) Dividend Received is not a Financing Activity.
C) Loan Repaid is not a Non-Cash Activity.
D) Income Tax Paid is not an Investing Activity.

🎯 Strategy

Used

Option Grouping
Tax = Operating
Dividend Received = Investing
Loan Repaid = Financing
Issue of Shares for Asset = Non-Cash

🧠 Memory Trick

(Dividend Received = Investing)

📚 Class 12, Accountancy Part II, Chapter 6: Cash Flow Statement.

20 ABC Ltd. has given you the following information:
• Machinery as on April 01, 2016 = ₹50,000
• Machinery as on March 31, 2017 = ₹60,000
• Accumulated Depreciation on April 01, 2016 = ₹25,000
• Accumulated Depreciation on March 31, 2017 = ₹15,000
During the year, a Machine costing ₹25,000 with Accumulated Depreciation of ₹15,000 was sold for ₹13,000.
Cash Flow from Investing Activities on the basis of the above information will be: (PYQ 2024)

A Net Cash Flow ₹12,000

B Net Cash Used ₹22,000

C Net Cash Flow ₹13,000

D Net Cash Used ₹35,000

💡 Short Explanation

Sale of Machinery = +₹13,000 (Inflow) Purchase of Machinery = −₹35,000 (Outflow) Net Cash Flow = ₹13,000 − ₹35,000 = −₹22,000 Purchases are determined by reconstructing the Machinery Account.

✅ Correct Answer Explanation

(Detailed) Step 1: Machinery Account (At Cost) Opening Balance = ₹50,000 Less: Machine Sold (Cost) = ₹25,000 Closing Balance = ₹60,000 Purchase (Balancing Figure) = ₹60,000 + ₹25,000 − ₹50,000 = ₹35,000 (Outflow) Step 2: Identify Cash Inflow Machine Sold for ₹13,000 (Inflow) Step 3: Net Investing Activity Net Cash Flow = ₹13,000 − ₹35,000 = −₹22,000 A negative result indicates Net Cash Used.

❓ Why Other Options Are Incorrect

A) Net Cash Flow ₹12,000
Confuses Profit/Loss on Sale with Cash Flow.
C) Net Cash Flow ₹13,000
Considers only Sale Proceeds and ignores Machinery Purchase.
D) Net Cash Used ₹35,000
Considers only Machinery Purchase and ignores Sale Proceeds.

🎯 Strategy

Used

Substitution/Calculation
Reconstruct Machinery Account.
Calculate Purchase.
Net Cash Flow = Sale Proceeds − Purchase Cost.

🧠 Memory Trick

Investing Activities = Purchase and Sale of Fixed Assets

📚 Class 12, Accountancy Part II, Chapter 6: Cash Flow Statement, Section: Investing Activities.

21 Identify the correct sequence to be followed while calculating Net Cash from Operating Activities from the following:
(PYQ 2024)

A (A), (B), (C), (D)

B (A), (C), (B), (D)

C (B), (A), (D), (C)

D (C), (B), (D), (A)

💡 Short Explanation

Start with Net Profit Before Tax. Adjust Non-Cash and Non-Operating Items. Arrive at Operating Profit Before Working Capital Changes. Adjust Working Capital Changes to determine Cash Generated from Operations.

✅ Correct Answer Explanation

(Detailed) Under the Indirect Method prescribed by AS-3: → (C) Calculate Net Profit Before Taxation and Extraordinary Items. → (B) Adjust for Non-Cash and Non-Operating Items such as Depreciation, Goodwill Written Off, Profit/Loss on Sale of Assets, etc. → (D) Arrive at Operating Profit Before Working Capital Changes. → (A) Adjust Current Assets and Current Liabilities to calculate Cash Generated from Operations. Thus, the correct sequence is: (C) → (B) → (D) → (A)

❓ Why Other Options Are Incorrect

A) (A), (B), (C), (D)
Starts with the final stage instead of the beginning.
B) (A), (C), (B), (D)
Cash cannot be generated before profit calculation and adjustments.
C) (B), (A), (D), (C)
Adjustments cannot be made before determining profit.

🎯 Strategy

Used

Option Grouping
Profit comes first.
Adjustments come second.
Working Capital stage comes third.
Cash Generated comes last.

🧠 Memory Trick

Profit → Adjustments → Working Capital → Cash

📚 Class 12, Accountancy Part II, Chapter 6: Cash Flow Statement, Section: Operating Activities.

22 Identify the correct sequence of the following steps involved in calculating Cash Flows from Operating Activities of a company:
(A) Operating Profit Before Working Capital Changes
(B) Cash Generated from Operations
(C) Income Tax Paid
(D) Net Cash Flow from Operating Activities
(E) Goodwill Amortised
(PYQ 2024)

A (E), (C), (D), (A), (B)

B (E), (A), (D), (B), (C)

C (E), (A), (B), (C), (D)

D (A), (B), (C), (D), (E)

💡 Short Explanation

Non-Cash Adjustments are made first. Working Capital Adjustments are made next. Income Tax Paid is deducted at the end. Final result is Net Cash Flow from Operating Activities.

✅ Correct Answer Explanation

(Detailed) Under the Indirect Method: → (E) Goodwill Amortised is added back because it is a Non-Cash Expense. → (A) Operating Profit Before Working Capital Changes is determined. → (B) Working Capital Adjustments are made to obtain Cash Generated from Operations. → (C) Income Tax Paid is deducted. → (D) Net Cash Flow from Operating Activities is obtained. Therefore, the sequence is: (E) → (A) → (B) → (C) → (D)

❓ Why Other Options Are Incorrect

A) (E), (C), (D), (A), (B)
Tax cannot be deducted before calculating Operating Profit.
B) (E), (A), (D), (B), (C)
Net Cash Flow is the final figure and cannot appear before tax deduction.
D) (A), (B), (C), (D), (E)
Goodwill Amortisation adjustment must be made at the beginning.

🎯 Strategy

Used

Elimination
Non-Cash Adjustments occur first.
Net Cash Flow is always the final result.
Only Option C follows the correct sequence.

🧠 Memory Trick

Profit Adjustment → Working Capital → Tax

📚 Class 12, Accountancy Part II, Chapter 6: Cash Flow Statement (Operating Activities).

23 Match List-I with List-II

List-I	List-II
A. Purchase of Tangible Assets	I. Operating Activity
B. Issue of Shares	II. Cash and Cash Equivalents
C. Increase in Current Assets	III. Investing Activity
D. Marketable Securities	IV. Financing Activity

A (A)-(I), (B)-(II), (C)-(III), (D)-(IV)

B (A)-(I), (B)-(III), (C)-(II), (D)-(IV)

C (A)-(I), (B)-(II), (C)-(IV), (D)-(III)

D (A)-(III), (B)-(IV), (C)-(I), (D)-(II)

💡 Short Explanation

Purchase of Fixed Assets → Investing Activity. Issue of Shares → Financing Activity. Current Assets affect Operating Activities. Marketable Securities are Cash Equivalents.

✅ Correct Answer Explanation

(Detailed) → Purchase of Tangible Assets is classified as an Investing Activity because it involves acquisition of Fixed Assets. → Issue of Shares is classified as a Financing Activity because it changes the capital structure. → Increase in Current Assets is adjusted under Operating Activities. → Marketable Securities are treated as Cash and Cash Equivalents due to their high liquidity. Thus: A-III, B-IV, C-I, D-II

❓ Why Other Options Are Incorrect

A), B), C)
Incorrectly classify Purchase of Tangible Assets as an Operating Activity.

🎯 Strategy

Used

Option Grouping
Shares → Financing.
Fixed Assets → Investing.
Current Assets → Operating.
Marketable Securities → Cash Equivalents.

🧠 Memory Trick

Operating = Current Assets

📚 Class 12, Accountancy Part II, Chapter 6: Cash Flow Statement.

24 Calculate the resulting Cash Flow and state the nature of Cash Flow from the following information:
Acquired Machinery for ₹3,50,000 by issuing cheque.
(PYQ 2024)

A Investing Activity and Outflow ₹3,50,000

B Investing Activity and Inflow ₹3,50,000

C Investing Activity and No Flow

D Operating Activity and Outflow ₹3,50,000

💡 Short Explanation

Machinery is a Fixed Asset. Purchase of Fixed Assets is an Investing Activity. Payment through cheque causes Cash Outflow.

✅ Correct Answer Explanation

(Detailed) → Machinery is a Tangible Fixed Asset. → Purchase of Machinery is classified as an Investing Activity under AS-3. → Since payment was made by cheque, Cash/Bank balance decreases. → Therefore, there is an Outflow of ₹3,50,000. Hence: Investing Activity and Outflow ₹3,50,000.

❓ Why Other Options Are Incorrect

B) Investing Activity and Inflow ₹3,50,000
Purchase creates Outflow, not Inflow.
C) Investing Activity and No Flow
Cheque payment involves actual cash movement.
D) Operating Activity and Outflow ₹3,50,000
Purchase of Machinery is not an Operating Activity.

🎯 Strategy

Used

Dimensional/Unit Analysis
Machinery = Investing Activity.
Purchase = Outflow.
Combine both conditions.

🧠 Memory Trick

Buy Asset = Money Bye-Bye

📚 Class 12, Accountancy Part II, Chapter 6: Cash Flow Statement.

25 Arrange the following in proper sequence while preparing Cash Flow Statement:
(PYQ 2024)

A (A), (B), (C), (D)

B (D), (A), (C), (B)

C (B), (A), (D), (C)

D (C), (B), (D), (A)

💡 Short Explanation

Net Profit Before Tax is calculated first. Operating Activities are prepared next. Investing Activities follow. Financing Activities are prepared last.

✅ Correct Answer Explanation

(Detailed) Standard sequence under AS-3: → (D) Calculate Net Profit Before Tax and Extraordinary Items. → (A) Prepare Cash Flow from Operating Activities. → (C) Prepare Cash Flow from Investing Activities. → (B) Prepare Cash Flow from Financing Activities. Therefore: (D) → (A) → (C) → (B)

❓ Why Other Options Are Incorrect

A) (A), (B), (C), (D)
Net Profit must be calculated first.
C) (B), (A), (D), (C)
Financing Activities cannot precede Operating Activities.
D) (C), (B), (D), (A)
Investing Activities cannot start the statement.

🎯 Strategy

Used

Elimination
Working Note comes first.
Operating Activities come before Investing and Financing.
Only Option B follows the prescribed format.

🧠 Memory Trick

Working Note → Operating → Investing → Financing

📚 Class 12, Accountancy Part II, Chapter 6: Cash Flow Statement.

26 Dividend Received is:
(PYQ 2024)

A Operating Activity

B Financing Activity

C Investing Activity

D Cash and Cash Equivalents

💡 Short Explanation

Dividend Received is earned on investments. It represents a return on investment. Hence classified as Investing Activity.

✅ Correct Answer Explanation

(Detailed) According to AS-3, Dividend Received by a non-financial enterprise is classified as an Investing Activity because it arises from investments held by the company. Thus, Dividend Received is shown under Investing Activities.

❓ Why Other Options Are Incorrect

A) Operating Activity
Not part of normal revenue-generating operations.
B) Financing Activity
Dividend Paid is Financing Activity, not Dividend Received.
D) Cash and Cash Equivalents
Dividend is a cash flow, not a cash equivalent.

🎯 Strategy

Used

Contextual/Tonal Matching
Dividend comes from investments.
Investment returns belong to Investing Activities.

🧠 Memory Trick

Receive Dividend = Invest Return

📚 Class 12, Accountancy Part II, Chapter 6: Cash Flow Statement.

27 While preparing Cash Flow Statement, Purchase of Goodwill is treated as:
(PYQ 2024)

A Operating Activity

B Financing Activity

C Investing Activity

D Extraordinary Item

💡 Short Explanation

Goodwill is an Intangible Fixed Asset. Purchase of Fixed Assets is an Investing Activity. Purchase results in Cash Outflow under Investing Activities.

✅ Correct Answer Explanation

(Detailed) According to AS-3, Investing Activities include acquisition and disposal of Long-Term Assets. Goodwill is an Intangible Non-Current Asset. Therefore, purchase of Goodwill is classified as an Investing Activity. (Note: Amortisation of Goodwill is adjusted in Operating Activities, but Purchase of Goodwill is an Investing Activity.)

❓ Why Other Options Are Incorrect

A) Operating Activity
Covers day-to-day business operations.
B) Financing Activity
Covers equity and borrowings.
D) Extraordinary Item
Purchase of Goodwill is a normal business transaction.

🎯 Strategy

Used

Contextual/Tonal Matching
Goodwill = Asset.
Purchase of Asset = Investing Activity.

🧠 Memory Trick

Fixed Assets = Investing Section

📚 Class 12, Accountancy Part II, Chapter 6: Cash Flow Statement.

28 Match List – I with List – II:

LIST - I	LIST - II
A. Purchase of Building	I. Financing Activity
B. Change in Inventory	II. Cash and Cash Equivalents
C. Cash Credit	III. Investing Activity
D. Dividend Paid	IV. Operating Activity

A (A)-(III), (B)-(IV), (C)-(II), (D)-(I)

B (A)-(III), (B)-(I), (C)-(II), (D)-(IV)

C (A)-(III), (B)-(II), (C)-(I), (D)-(IV)

D (A)-(III), (B)-(IV), (C)-(I), (D)-(II)

💡 Short Explanation

Purchase of Building relates to Investing Activities. Change in Inventory affects Operating Activities. Cash Credit is treated as Cash and Cash Equivalents. Dividend Paid is a Financing Activity.

✅ Correct Answer Explanation

(Detailed) (A) Purchase of Building → (III) Investing Activity • Purchase of long-term assets is classified under Investing Activities. (B) Change in Inventory → (IV) Operating Activity • Inventory is a Current Asset and its changes are adjusted while calculating Operating Activities. (C) Cash Credit → (II) Cash and Cash Equivalents • Cash Credit and Bank Overdrafts are often treated as Cash and Cash Equivalents under AS-3 (Revised). (D) Dividend Paid → (I) Financing Activity • Dividend Paid represents a distribution to shareholders and is therefore a Financing Activity. Hence: (A)-(III), (B)-(IV), (C)-(II), (D)-(I)

❓ Why Other Options Are Incorrect

B) (A)-(III), (B)-(I), (C)-(II), (D)-(IV)
Change in Inventory is not a Financing Activity.
C) (A)-(III), (B)-(II), (C)-(I), (D)-(IV)
Inventory is not Cash and Cash Equivalents.
D) (A)-(III), (B)-(IV), (C)-(I), (D)-(II)
Dividend Paid is not Cash and Cash Equivalents.

🎯 Strategy

Used

Elimination
Purchase of Building = Investing.
Change in Inventory = Operating.
Dividend Paid = Financing.
Only Option A satisfies all classifications.

🧠 Memory Trick

Dividend = Financing

📚 Class 12, Accountancy Part-II, Chapter 6: Cash Flow Statement (Classification of Activities).

29 Arrange the following in the context of Cash Flow Statement:
(A) Calculation of Cash Flow from Operating Activities
(B) Calculation of Cash Flow from Financing Activities
(C) Calculation of Net Increase/Decrease in Cash and Cash Equivalents during the Year
(D) Calculation of Cash Flow from Investing Activities
(E) Calculation of Net Profit Before Tax and Extraordinary Item
Choose the correct answer from the options given below: (PYQ 2025)

A D, A, B, E, C

B C, D, B, A, E

C A, E, B, D, C

D E, A, D, B, C

💡 Short Explanation

Cash Flow Statement starts with Net Profit. Operating Activities are calculated first. Investing and Financing Activities follow. Net Increase/Decrease in Cash is calculated last.

✅ Correct Answer Explanation

(Detailed) According to AS-3 (Revised), the sequence is: (E) Calculation of Net Profit Before Tax and Extraordinary Item (A) Calculation of Cash Flow from Operating Activities (D) Calculation of Cash Flow from Investing Activities (B) Calculation of Cash Flow from Financing Activities (C) Calculation of Net Increase/Decrease in Cash and Cash Equivalents Thus, the correct sequence is: E → A → D → B → C

❓ Why Other Options Are Incorrect

A) D, A, B, E, C
Investing Activities cannot be prepared before Net Profit and Operating Activities.
B) C, D, B, A, E
Starts with the final result.
C) A, E, B, D, C
Operating Activities cannot be calculated before determining Net Profit.

🎯 Strategy

Used

Option Grouping
Start with Net Profit.
End with Net Increase/Decrease in Cash.
Only Option D follows the prescribed AS-3 format.

🧠 Memory Trick

Profit → Operating → Investing → Financing → Net Change

📚 Class 12, Accountancy Part-II, Chapter 6: Cash Flow Statement.

30 Match List I with List II:

LIST I	LIST II
A. Employee Benefit Expenses	I. Investing Activity
B. Dividend Received	II. Operating Activity
C. Loan Raised	III. Financing Activity

A A-I, B-II, C-III

B A-II, B-III, C-I

C A-II, B-I, C-III

D A-III, B-I, C-II

💡 Short Explanation

Employee Benefit Expenses are Operating Activities. Dividend Received is an Investing Activity. Loan Raised is a Financing Activity.

✅ Correct Answer Explanation

(Detailed) (A) Employee Benefit Expenses → (II) Operating Activity • Salaries, wages and employee benefits arise from normal business operations. (B) Dividend Received → (I) Investing Activity • Dividend Received represents return on investments. (C) Loan Raised → (III) Financing Activity • Raising loans changes the borrowing structure of the company. Therefore: A-II, B-I, C-III

❓ Why Other Options Are Incorrect

A) A-I, B-II, C-III
Employee Benefit Expenses are not Investing Activities.
B) A-II, B-III, C-I
Dividend Received is not Financing Activity.
D) A-III, B-I, C-II
Employee Benefit Expenses are not Financing Activities.

🎯 Strategy

Used

Contextual Matching
Work-related expenses = Operating.
Investment returns = Investing.
Borrowings = Financing.

🧠 Memory Trick

Debt = Financing

📚 Class 12, Accountancy Part-II, Chapter 6: Cash Flow Statement.

31 Purchase of Land using a cheque is classified as:
(Cash Flow Statement Question) (PYQ 2025)

A Operating Activity

B Investing Activity

C Financing Activity

D Non-Cash Activity

💡 Short Explanation

Land is a Fixed Asset. Purchase of Fixed Assets is an Investing Activity. Payment by cheque involves Cash Outflow.

✅ Correct Answer Explanation

(Detailed) According to AS-3 (Revised), Investing Activities include acquisition and disposal of Long-Term Assets. Land is a Fixed Asset. Purchase of Land represents acquisition of a Long-Term Asset and therefore falls under Investing Activities. Since payment is made through cheque, there is actual movement of Cash/Bank Balance. Hence, it is an Investing Activity.

❓ Why Other Options Are Incorrect

A) Operating Activity
Operating Activities relate to normal business operations.
C) Financing Activity
Financing Activities relate to equity and borrowings.
D) Non-Cash Activity
Cheque payment involves actual Cash/Bank movement.
A non-cash transaction would be purchase of land by issuing shares.

🎯 Strategy

Used

Contextual Matching
Land = Fixed Asset.
Fixed Asset Purchase = Investing Activity.
Payment by Cheque = Cash Outflow.

🧠 Memory Trick

Fixed Capital = Financing

📚 Class 12, Accountancy Part-II, Chapter 6: Cash Flow Statement (Classification of Activities).

CUET UG Categorised PYQ Accountancy Unit 10

Test Complete!

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