Very Short Type Questions - Business Arithmetic, Entrepreneurship, Class 12 | Additional Study Material for Commerce PDF Download

Q1. What is cash flow projection ? (TBQ) (1 mark)
Ans. Cash flow projection shows how cash is expected to flow in and out of the business.

Q2. Name the forms of budgeting. (1 mark)
Ans.
(i) Traditional budgeting.
(ii) Zero based budgeting.

Q3. Differentiate between cash flow project and cash flow statement. (TBQ) (1 mark)
Ans. Cash flow statement shows how cash has flowed in and out of business in the past. Whereas, cash flow project shows how the cash is expected to flow in and out of the business.

Q4. What is zero based budgeting ? (1 mark)
Ans. Zero based budgeting is the creation of a complete new budget from the ground as no history existed.

Q5. Define Cash. (1 mark)
Ans. Cash is defined as cash in hand and demand deposits with bank.

Q6. What do you mean by :
(i) Cash flow statement.
(ii) Cash equivalents.
(2 marks)
Ans.
(i) Cash flow statement depicts the cash generated and utilised by a company.
(ii) Cash equivalents refer to short term highly liquid investments which are readily convertible into cash.

Q7. What is Budgetary System ? (2 marks)
Ans. Budgetary System is a system of controlling cost which includes prepartation of budget, coordinating the departmants and establishing responsibilities, comparing actual performance with expected performance, finding reasons for deviations, suggesting measures so that in future such deviations do not occur.

Q8. Define Budgetary Control. (2 marks)
Ans. It is a combination of goal setting machine for increasing an enterprise’s profit and goal achieving machine for facilitating organizational coordination and planning while achieving the budgeted targets.

Q9. What do you mean by Cash Inflow and Cash Outflow ? (2 marks)
Ans. All receipts of money are known as cash inflows. Example interest and dividend received. All payments made in money are known as cash outflows. Example : Commission paid.

Q10. Give one difference between cash flow statement and income statement. (1 mark)
Ans. Cash flow statement shows how cash has flowed in and out of a business, whereas income statement enables us to determine the profit over a period of time.

Q11. Give few examples of cash inflows in the business. (2 marks)
Ans.
(i) Rent received.
(ii) Sale of assets.
(iii) Interest received.
(iv) Sales receipt.

Q12. What do you understand by the term “Budget”. (1 mark)
Ans. Budget is a financial statement of a plan for coordinating the various operations of the business.

Q13. Give few examples of cash outflow in business. (2 marks)
Ans.
(i) Purchase of fixed assets.
(ii) Interest on loan.
(iii) Sales commission.
(iv) Premium paid.

Q14. What are the key aspects of financial decision making ? (1 mark)
Ans. The key aspects of financial decision making are investment, financing and dividends.

Q15. Give two examples of current assets. (2 marks)
Ans.
(i) Cash and bank balances.
(ii) Accrued Income.

Q16. Give two examples of current liabilities. (2 marks)
Ans.
(i) Bank overdraft.
(ii) Divided payable.

Q17. Why financial control is considered as an important activity ? (1 mark)
Ans. Financial control is a critically important activity to help the business ensuring that the business is meeting its objectives.