Cash Flow Statement Test - 24

Operating activities are the main revenue generating activities of an enterprise. As, such, they include cash flow from those transactions and events which enter into the ascertainment of net profit or loss of the enterprise.

General Reserves are the part of profits and used to find out the operating profit during the year in Operating activities while preparing cash flow statement.

Sale of machinery is concerned with investing activities. It will be added to investing activities as proceeds from sale of machinery as cash received.

Issue of bonus shares will not affect the preparation of cash flow statement as in this transaction no cash involve.

Dividend Received is concerned with investing activities. A firm will received dividend only if it has invested in the shares of some other company and income received on their Investment as Dividend.

Decrease in current assets (inventory) will be added while calculating cash flow from operating activities.

Amortization of patent will not create a cash flow as there is no cash transaction.

Deferred Tax liabilities are shown under the heading Non-current Liabilities. In case Accounting Income is more than the Taxable Income, it results in Deferred Tax Liability.

Goods purchase in cash is not a cash inflow as in this transaction cash is going out.

The decrease in the value of Trade Receivables (Current assets) will be added in operating activities while preparing casflow statement.