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Commerce Exam  >  Commerce Test  >  Accountancy Class 12  >  Test: Cash Flow Statements- Assertion & Reason Type Questions - Commerce MCQ

Cash Flow Statements- Assertion & Reason Type Questions - Free with Solutions


MCQ Practice Test & Solutions: Test: Cash Flow Statements- Assertion & Reason Type Questions (4 Questions)

You can prepare effectively for Commerce Accountancy Class 12 with this dedicated MCQ Practice Test (available with solutions) on the important topic of "Test: Cash Flow Statements- Assertion & Reason Type Questions". These 4 questions have been designed by the experts with the latest curriculum of Commerce 2026, to help you master the concept.

Test Highlights:

  • - Format: Multiple Choice Questions (MCQ)
  • - Duration: 8 minutes
  • - Number of Questions: 4

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Test: Cash Flow Statements- Assertion & Reason Type Questions - Question 1
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Directions : In the following questions, a statement of Assertion (A) is followed by a statement of Reason (R). Mark the correct choice as:

Assertion (A): By-back of equity shares comes under financing activities.

Reason (R): Financing activities are the activities which result in change in size, composition of owner's capital and borrowing of the enterprise from other sources.

Detailed Solution: Question 1

Financing activities are those which brings changes in composition and size of owner's capital and borrowings of an enterprise. For instance: Cash received from issuing shares or other similar securities. Cash received from issuing loans, debentures, bonds, notes, and other short-term or long-term borrowings.

Test: Cash Flow Statements- Assertion & Reason Type Questions - Question 2
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Directions : In the following questions, a statement of Assertion (A) is followed by a statement of Reason (R). Mark the correct choice as:

Assertion (A): Proceeds from Issue of Shares and Debentures are recorded in Financing Activity.

Reason (R): Issue of shares and debentures are the cash inflow or outflow made to finance the company.

Detailed Solution: Question 2

  • The issue of Equity and preference share capital for cash only. The issue of Debentures, Bonds and long-term note for cash only.

  • A company's cash flow from financing activities refers to the cash inflows and outflows resulting from the issuance of debt, the issuance of equity, dividend payments, and the repurchase of existing stock.

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Test: Cash Flow Statements- Assertion & Reason Type Questions - Question 3
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Directions : In the following questions, a statement of Assertion (A) is followed by a statement of Reason (R). Mark the correct choice as:

Assertion (A): Depreciation is added to the net profit before tax.

Reason (R): Depreciation is a non-cash item which is an expense.

Detailed Solution: Question 3

There was cash outflow for depreciation. Companies use investing cash flow to make initial payments for fixed assets that are later depreciated. Depreciation is a type of expense that is used to reduce the carrying value of an asset. Depreciation is entered as a debit-to-expense and a credit to asset value so actual cash flows are not exchanged.

Test: Cash Flow Statements- Assertion & Reason Type Questions - Question 4
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Directions : In the following questions, a statement of Assertion (A) is followed by a statement of Reason (R). Mark the correct choice as:

Assertion (A): Sale of fixed assets is written under the Investing Activities.

Reason (R): Sale of fixed assets leads to inflow of cash.

Detailed Solution: Question 4

Investing activities are the acquisition and disposal of long-term assets and other investments not included in cash equivalents.

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About this Commerce Practice Test

This test contains 4 MCQs on Cash Flow Statements- Assertion & Reason Type Questions with detailed solutions for each question. It is part of the Accountancy Class 12 course on EduRev, designed to align with the current Commerce syllabus. Each solution explains not just the correct answer but also gives you an understanding of the topic — not just to attempt the question but also help you prepare for the exam with practice.

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If you found this Cash Flow Statements- Assertion & Reason Type Questions MCQ Test helpful, you can further enhance your Commerce preparation with in-depth courses on EduRev, for all the subjects and topics available in Accountancy Class 12 course. The course offers:
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