Cash Flow Statement (12 Accountancy)

Practise chapter-wise MCQs for Class 12 Accountancy — Cash Flow Statement. Every question comes with the correct answer and an explanation.

✓ 100% Free ✓ No Login Needed ✓ NCERT / CBSE Aligned ✓ Download as PDF

TL;DR: Practise chapter-wise MCQs for Class 12 Accountancy — Cash Flow Statement. Every question comes with the correct answer and an explanation.

Written & reviewed by the Syllab.in Academic Team (CBSE/NCERT subject experts) · Updated Aug 7, 2026

🤖 Stuck on any question? Ask Syllab's free AI Tutor for a step-by-step explanation — instant, unlimited, no login.

Practise chapter-wise MCQs for Class 12 Accountancy — Cash Flow Statement. Every question comes with the correct answer and an explanation.

Cash Flow Statement MCQs with Answers & Explanations

Q1. An increase in accounts payable would:

Decrease cash flow from operations
Have no effect on cash flow from operations
Be treated as an investing activity
Increase cash flow from operations ✓ (correct)

Explanation: An increase in accounts payable means the company has received goods or services but has not yet paid cash for them, thus increasing cash available in operations.

Q2. Which of the following activities is least likely to be classified under Cash Flow from Investing Activities?

Repayment of long-term loan ✓ (correct)
Sale of investments
Purchase of machinery
Proceeds from sale of land

Explanation: Repayment of long-term loan is a financing activity as it relates to the company's debt structure.

Q3. An increase in inventory is treated as a deduction from net profit while preparing the Cash Flow Statement under the indirect method because:

It represents an increase in cash
It represents a decrease in cash ✓ (correct)
It is a non-cash item
It is an investing activity

Explanation: An increase in inventory means cash has been used to acquire more goods, thus representing a decrease in cash available.

Q4. Redemption of preference shares is an example of:

Operating Activity
Investing Activity
Financing Activity ✓ (correct)
None of the above

Explanation: Redemption of preference shares involves returning capital to shareholders, which is a financing activity.

Q5. Which of the following would be classified as a Cash Flow from Operating Activities?

Issuance of shares
Payment of dividend
Collection from debtors ✓ (correct)
Purchase of buildings

Explanation: Collection from debtors relates to the primary revenue-generating activities of the business.

Q6. A company sells old machinery for ₹50,000. This transaction will result in:

Cash inflow from operating activities
Cash outflow from financing activities
Cash outflow from investing activities
Cash inflow from investing activities ✓ (correct)

Explanation: Sale of an asset like machinery is an investing activity, and the proceeds represent a cash inflow.

Q7. Under the indirect method, depreciation is:

Added back to net profit ✓ (correct)
Deducted from net profit
Ignored
Shown as an investing activity

Explanation: Depreciation is a non-cash expense. In the indirect method, it is added back to net profit because it was deducted to arrive at net profit but did not involve an outflow of cash.

Q8. Under the direct method of preparing the Cash Flow Statement, 'Cash received from customers' is:

Not considered in operating activities
Calculated from sales revenue ✓ (correct)
Calculated from gross profit
The same as sales revenue

Explanation: Under the direct method, cash receipts from customers are directly determined by adjusting sales revenue for changes in debtors and any prepaid revenue.

Q9. If a company repurchases its own shares, this would be considered:

A cash outflow from operating activities
A cash inflow from investing activities
A cash outflow from financing activities ✓ (correct)
A cash inflow from financing activities

Explanation: Repurchasing shares involves the company paying cash to its shareholders, which is a use of cash and a financing activity.

Q10. Which of the following is NOT a part of the Cash Flow Statement?

Cash Flow from Operating Activities
Cash Flow from Investing Activities
Cash Flow from Financing Activities
Non-cash expenses adjustment ✓ (correct)

Explanation: Non-cash expenses like depreciation are adjustments made *within* the calculation of cash flow from operating activities (indirect method), not a separate section of the statement itself.

More 12 Accountancy MCQs

🤖 Stuck on any of these? Ask Syllab's free AI Tutor to explain step by step →