Page 320 - GMAT 2017b_Neatb

Accounting Practice Test

38. A profit-making service sector entity records what is (C) not appear as no cash flow occurs as a result of a
originally contributed by its shareholders in which bonus issue.
account? (D) be included as part of cash flow from operations.
(A) Income and expenditure.
43. In a cash flow statement the payment of a preference
(B) Accumulated fund.
dividend will:
(C) Capital (A) Be included under financing activities.
(D) Members’ (B) Be included under investing activities.
(C) be included under returns on investments and
servicing of finance.
39. Cash flow statements are required by:
(D) Be included under net cash flow from operations.
(A) Company law.
(B) The shareholders of a company. 44. The main reason for a company preparing a cash flow
(C) The auditors of a company. statement is:
(D) Financial Reporting Standard No 1. (A) To comply with legal requirements.
(B) To show the financial position of the company
40. XYZ Ltd made an operating profit in 2001 but has at the end of the period.
increased its overdraft during the year. Which of the (C) To show the profit or loss of the company for
the period.
following factors could explain this:
(A) Taking extended periods of credit from its (D) To show, in a standard format, the sources and
uses of cash during the period.
suppliers.
(B) Additional investment in purchased fixed
45. Which of the following is not an essential prerequisite
assets.
to permit the successful use of financial statements for
(C) Reducing its depreciation charge for the year. ratio analysis?
(D) Reducing the period of credit allowed to its (A) The accounts should use comparable accounting
customers. policies.
(B) The accounts should be drawn from similar types
of organizations.
41. The following balances have been extracted from the
(C) The accounts should be available for several
financial statements of XYZ Ltd at its year end 31 accounting periods.
December 2001: £000 (D) The accounts used should not include forecast
financial information.
Operating profit before depreciation and tax 235
Depreciation 47
46. The current ratio is an indicator of which following
Taxation 56 characteristic of an organization?
Debtors 67 (A) The current level of profitability.
(B) The future level of profitability.
Creditors 56
(C) The investment potential.
Stocks 70
(D) The liquidity in the short term.
Balances at 1 January 2001 were
Debtors 50 47. The following data was extracted from the records of
XYZ Ltd at 31 December 2001 and is to be used for
Creditors 60
Questions 46 and 47.
Stocks 55
£000
Which of the following represents the net cash flow Sales 2500
from operations for 2001? Cost of Sales 1200
Stock at 31 December 2001 350
(A) £224 000.
Stock at 1 January 2001 200
(B) £168 000.
Debtors 340
(C) £271 000. Creditors 400
(D) £199 000. The debtors collection period in days was?
(A) 43.
42. In a cash flow statement a bonus issue will: (B) 45.
(A) be included in cash flow from investing activities.
(B ) be included in cash flow from financing activities.
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