State with reason whether ‘Purchase of fixed asset on long term deferred payment’ would result in inflow, outflow or no flow of cash.
SOLUTION There is no flow of cash because purchase of fixed asset on credit will not affect cash.
Give one transaction which may result into outflow of cash and one which may result into no flow of cash.
SOLUTION Outflow of Cash: Purchase of goods for Cash.No flow of Cash: Purchase of goods on Credit.
Give any two transactions which result into inflow of cash.
SOLUTION (i) Sale of goods for cash, (ii) Cash received from Trade Receivables.
Give one difference between an investing activity and a financing activity.
SOLUTION Investing activities are related to purchase and sale of long-term assets whereas financing activities are related to activities that result in change in capital and borrowings of the enterprise.
Give one difference between an operating activity and an investing activity.
SOLUTION Operating activities are related to purchase and sale of goods and services Whereas investing activities are related to purchase and sale of long- term assets.
State how Cash Flow Statements are historical in nature?
SOLUTION Cash Flow Statement is historical in nature because it is prepared on the basis of Profit and Loss Account and Balance Sheet, which is based on past transactions.
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