Question

Que : Mary buys and sells ladies' handbags. She buys for cash and sells on one month's credit. She pays £20 for each bag and sells them for £35 each. During March, her first month of trading, she bought 50 handbags for cash and had 10 handbags remaining in inventory at the month end. Ignoring any other expenses or payments, which of the following statements is true for March?
Select one:
a. The business made a gross profit for the month of £600 and its bank balance decreased by 1,000 as a result of trading.
b. The business made a gross profit for the month of £400 and its bank balance increased by £400 as a result of trading.
c. The business made a gross profit for the month of £600 and its bank balance decreased by £1,400 as a result of trading
d. The business made a gross profit for the month of £600 and its bank balance increased by £1,400 as a result of trading.

Que: In cash flows, when a firm invests in fixed assets and short-term financial investments results in

Select one:
a. Increased Cash
b. Increased Equity
c. Increased Liabilities
d. Decreased Cash

Que: Which of the following terms refers to the cost of an equipment allocated as an expense over its estimated useful life?
Select one:
a. None of the above
b. Sunk cost
c. Book value
d. Depreciation

Que: Which item comes under financial activities in cash flow?
Select one:
a. Issue of Common stock
b. None of the above
c. Purchase of Fixed Assets
d. Sale of Fixed Assets

Que: Cash Flow Statement is based upon
Select one:
a. Accrual basis of accounting
b. Cash basis of accounting
c. Credit basis of accounting
d. None of the above

Que: Accumulated Depreciation, Equipment, is shown as a(n)
Select one:
a. deduction from net income on the statement of owner's equity
b. contra account on the balance sheet
c. expense on the income statement
d. liability on the balance sheet

Que: If a company issues 1 million £1 shares at £1.30 per share, what will be the effect on the statement of cash flows?
Select one:
a. Cash flows from financing activities will increase by £1.0 million.
b. Cash flows from investing activities will increase by £1.3 million.
c. Cash flows from investing activities will increase by £1.0 million.
d. Cash flows from financing activities will increase by £1.3 million.

Que: The statement of cash flow clarifies cash flows according to
Select one:
a. Investing and Non-operating Flows
b. None of the above
c. Operating, Investing, and Financing Activities
d. Operating and Non-operating Flows

Que: Dessy plc made an operating profit of £185,500 after charging depreciation of £31,200. During that year, trade payables increased by £26,600 and inventory increased by £40,300. There was no change to trade receivables. Assuming that no other factors affected it, the cash generated from operations would have been:
Select one:
a. None of the above
b. £283,600.
c. £203,000.
d. £230,400.

Que: Accountants refer to the wages earned by employees but not paid to them at the end of an accounting period as:
Select one:
a. carrying wages
b. deposited wages
c.accrued wages

d. booked wages

Answer 1

1-	option is A	The business made a gross profit for the month of £600 and its bank balance decreased by 1,000 as a result of trading.	As cash purchase would results in decrease in cash balance and a gross profit of 600 is made on sale
	purchase of inventory	50*35	1750
	sales	35*40	1400
	cost of goods sold	20*40	800
	gross profit		600
2-	Option is D	Decreased cash	as this would results in decrease in cash flow due to purchase of fixed assets and short term investments
3-	Option is D	Depreciation	cost of an equipment allocated as an expense over its estimated useful life is called depreciation expense
4-	option is A	Issue of Common stock	proceeds from issueance of common stock results in cash inflow and it is a part of financing activities
5-	option is B	Cash basis of accounting	it records all the cash inflow and outflow during a period of time
6-	option is B	contra account on the balance sheet	it is shown by deducting from the fross assets
7-	option is D	Cash flows from financing activities will increase by £1.3 million.
8-	option is C	Operating, Investing, and Financing Activities	it denotes the cash flow by the nature of activity like operating, financing or investing
9-	Option is C		203000
	cash generated from operations
	net income		185500
	depreciation		31200
	change in working capital
	increase in trade payable		26600
	Increase in inventory		-40300
	cash flow fromoperations		203000
10-	Option is C	Accrued wages	because wages has become due but not paid so it would be recorded as wages expense and current liability for the period