Question

Which of the following is presented in the activities section of the Statement of Cash Flows?

Purchase of a treasury bill three months before its maturity date.

Exchange differences from translating foreign currency denominated cash flows.

Acquisition of equipment through issuance of short-term notes payable.

Bank overdraft that can be offset.

In the Statement of Cash Flows of a non-financial institution, interest income received is presented under…
a)	Operating activities	d)	A or B
b)	Financing activities	e)	A or C
c)	Investing activities

Which of the following statements is correct?

I	Accounting provides qualitative information, financial information, and quantitative information.
II	Qualitative information is found in the notes to the financial statements only.
III	Accounting is considered an art because it is supported by an organized body of knowledge.
IV	Accounting is considered a science because it involves the exercise of skill and judgment.
V	Measurement is the process of assigning numbers to objects such as inventories or plant assets and to events
	such as purchases or sales.
VI	All quantitative information is also financial in nature.
VII	The accounting process of assigning peso amounts or numbers to relevant objects and events is known as
	identification.
a)	I and V
b)	I , II, VI and V

c)	I, II, III, IV and VII
d)	II, VI, and V

PAS 8 - Changes in accounting policies, estimates and errors
16	These arise from misapplication of accounting policies, mathematical mistakes, oversights or
			misinterpretations of facts.
		a)	Errors                                                                               c)    Change in accounting policy
		b)	Change in accounting estimates                                     d) Impracticable application

Answer 1

Answers :

1. i) Purchase of treasury bill three months before its maturity date : This is covered under cash and cash equivalent because cash and cash equivalents include cash and marketable securities such as commercial paper and government bonds because they are liquid and not subject to material fluctuations in value and treasury bill is also a marketable security. So it is not shown under any of the activity of cash flow statement. It does not make changes in any of the activity but it would be shown under opening cash and cash equivalent and added to the net increase or decrease in cash obtained by adding cash flow from operating ,investing and financing activities to get the closing cash and cash equivalent.

ii) Exchange differences from translating foreign currency denominated cash flows: Unrealized gains and losses arising from the changes in foreign exchanges are not cash flows. However, to reconcile cash and cash equivalents at the beginning and at end of the period, the effect of change in exchange rate change on cash and cash equivalents held or due in foreign currency must be presented in the statement of cash flows. The entity shall present the resulting unrealised gain and loss separately from cash flow from operating,investing and financing activities and not in any of these activities.

iii)Acquisition of equipment through issuance of short term notes payable: It comes under finacing activity as in this equipment is purchased by issuing of s1qhort term notes payable and note payable are shown under financing activities.

iv)Bank overdraft that can be offset: If the overdraft is not repayble on demand, changes in the balance are treated as financing activity not a change in cash and cash equivalents.If they are treated as a financing activity an increase in the overdraft will be a source of finance. A repayment of overdraft is a repayment of borrowing.

2. In case of non financial institution, interest income received is presented under: It comes under investing activites as inflows. As it is interest income from loan advance to others.

3.Following correct statements:

B ( 1,2,5and 6th statement is correct)

1st statement is correct : Accounting provides qualitative, financial and quantitative information .

  2nd statement is also correct :Qualitative information is found inthes to the financial statements only.

5th statement is correct : Measurement is the process of assigning numbers to objects such as inventories or plants ,assets and to events such as pruchase and sale .

6th statement is correct : All quantitaive information is also financial in nature.

4.These arise from misapplication of accounting policies ,mathematical mistake oversights or misinterpretation of facts:

Errors are arise from misapplication of accounting policies, mathematical mistake oversights or misinterpretation of facts.