TRB PG Assistant - Funds flow statement, cash flow statement as per AS 3, budgets and budgetary control, marginal costing and break-even analysis Online Test (MCQ Quiz)

1. Which of the following is NOT a primary objective of a Funds Flow Statement?

A) To ascertain the causes of changes in working capital B) To show the inflow and outflow of funds during a period C) To measure the profitability of a company D) To analyze the financing and investing activities of a firm

2. In a Funds Flow Statement, an increase in current assets (other than cash) is treated as:

A) A source of funds B) An application of funds C) Neither a source nor an application of funds D) A non-fund item

3. Which of the following is considered a 'fund' in the context of a Funds Flow Statement?

A) Fixed assets B) Depreciation C) Investments D) Working capital

4. The Cash Flow Statement, as per AS 3, classifies cash flows into which of the following categories?

A) Operating, Investing, and Financing B) Operating, Trading, and Non-operating C) Current, Non-current, and Deferred D) Inflow, Outflow, and Net

5. Which of the following activities in a Cash Flow Statement typically involves the purchase or sale of long-term assets and investments?

A) Operating Activities B) Investing Activities C) Financing Activities D) Non-cash Activities

6. Under the direct method of preparing the Operating Activities section of a Cash Flow Statement, which of the following is directly reported?

A) Profit before tax B) Depreciation expense C) Cash receipts from customers D) Gain on sale of fixed assets

7. Which of the following is a common adjustment made to net profit to arrive at cash flow from operating activities under the indirect method?

A) Add back depreciation B) Subtract increase in accounts receivable C) Add decrease in inventory D) Subtract cash paid for dividends

8. What is the primary purpose of a budget?

A) To record historical financial data B) To provide a framework for planning and controlling future operations C) To analyze past performance D) To determine the market value of assets

9. A fixed budget is prepared for:

A) A range of activity levels B) A single level of activity C) Multiple levels of activity D) Variable costs only

10. Which type of budget is revised during the budget period to take into account changes in activity levels or other relevant factors?

A) Fixed Budget B) Flexible Budget C) Master Budget D) Zero-Based Budget

11. The process of comparing actual results with budgeted results and taking corrective action is known as:

A) Budget preparation B) Budgetary control C) Budget variance analysis D) Forecasting

12. Which of the following is NOT a component of a Master Budget?

A) Sales Budget B) Production Budget C) Financial Budget D) Variance Report

13. In Zero-Based Budgeting (ZBB), every activity must be justified:

A) On a historical basis B) As a percentage of the previous year's budget C) For its own sake D) From scratch, regardless of previous budgets

14. Marginal costing is also known as:

A) Absorption costing B) Direct costing C) Full costing D) Standard costing

15. In marginal costing, which costs are treated as product costs and included in the inventory valuation?

A) Only variable costs B) Only fixed costs C) Both variable and fixed costs D) Prime costs

16. The difference between the selling price per unit and the variable cost per unit is called:

A) Contribution Margin per unit B) Profit per unit C) Fixed Cost per unit D) Total Contribution

17. The formula for Contribution Margin Ratio is:

A) (Sales - Variable Costs) / Sales B) Variable Costs / Sales C) Fixed Costs / Sales D) (Sales - Fixed Costs) / Sales

18. Which of the following is the formula for the Break-Even Point (in units)?

A) Fixed Costs / Contribution Margin per unit B) Total Sales / Contribution Margin Ratio C) Fixed Costs / Sales D) Contribution Margin per unit / Fixed Costs

19. The Break-Even Point (in sales revenue) can be calculated as:

A) Fixed Costs / Contribution Margin per unit B) Total Fixed Costs / Contribution Margin Ratio C) Total Variable Costs / Contribution Margin Ratio D) Total Sales / Contribution Margin per unit

20. If fixed costs increase, the break-even point will:

A) Decrease B) Increase C) Remain the same D) Become zero

21. A company's ability to meet its short-term obligations is best assessed by which statement?

A) Funds Flow Statement B) Profit and Loss Account C) Cash Flow Statement D) Balance Sheet

22. Which of the following is a common non-fund item that is added back to net profit in the operating activities of a cash flow statement?

A) Increase in accounts payable B) Loss on sale of asset C) Dividend paid D) Purchase of machinery

23. When preparing a cash flow statement using the indirect method, an increase in accounts receivable indicates:

A) More cash collected than sales revenue B) Less cash collected than sales revenue C) No impact on cash flow D) Cash inflow from operations

24. Which of the following is a financing activity in a cash flow statement?

A) Purchase of land B) Payment of dividends C) Sale of goods D) Interest received

25. A budget that remains constant irrespective of the volume of output is called a:

A) Flexible budget B) Fixed budget C) Performance budget D) Rolling budget

26. Which budget is often called the 'cornerstone' of the master budget and forms the basis for many other budgets?

A) Production Budget B) Cash Budget C) Sales Budget D) Expense Budget

27. The difference between the budgeted cost and the actual cost for a given level of activity is known as:

A) Budgetary variance B) Variance analysis C) Cost variance D) Performance appraisal

28. Which of the following is a primary advantage of budgetary control?

A) Eliminates the need for internal audits B) Ensures profits are always maximized C) Facilitates planning, coordination, and control D) Guarantees that all budgets will be met

29. A cash budget helps in:

A) Determining inventory levels B) Planning for future cash needs and excesses C) Evaluating the profitability of products D) Controlling overhead expenses

30. In marginal costing, fixed manufacturing overheads are:

A) Inventoriable B) Expensed in the period incurred C) Allocated to products based on direct labor hours D) Treated as a variable cost

31. The term 'contribution margin' represents the amount of revenue available to cover:

A) Variable costs and generate profit B) Fixed costs and generate profit C) Only fixed costs D) Only variable costs

32. If the selling price per unit decreases while variable cost per unit and total fixed costs remain the same, the break-even point in units will:

A) Decrease B) Increase C) Remain unchanged D) Become indeterminate

33. The margin of safety is the difference between:

A) Actual sales and break-even sales B) Fixed costs and variable costs C) Total revenue and total variable costs D) Budgeted profit and actual profit

34. Which of the following is a disadvantage of marginal costing?

A) It simplifies decision-making regarding pricing and product mix B) It ignores fixed costs, leading to potential underpricing C) It is not suitable for external reporting under GAAP/IFRS D) It assumes variable costs are truly constant

35. A Funds Flow Statement shows changes in:

A) All assets and liabilities B) Only current assets and current liabilities C) Working capital and its components D) Cash and cash equivalents

36. Which of the following is a source of funds in a Funds Flow Statement?

A) Redemption of debentures B) Purchase of machinery C) Payment of dividend D) Write-off of preliminary expenses

37. Under the indirect method of cash flow from operations, a decrease in inventory is:

A) Added to net profit B) Deducted from net profit C) Ignored D) Treated as an investing activity

38. Cash flows from interest and dividends received are typically classified as which type of activity in a Cash Flow Statement?

A) Operating Activities B) Investing Activities C) Financing Activities D) Mixed Activities

39. A long-term budget that covers the planned capital expenditures of a company is called a:

A) Operating Budget B) Capital Budget C) Cash Budget D) Sales Budget

40. Which type of budget requires justification for all expenditures, not just incremental amounts?

A) Incremental Budget B) Activity-Based Budget C) Zero-Based Budget D) Performance Budget

41. A budget that is prepared for a specific period and then replaced by a new budget for the next period is a:

A) Rolling Budget B) Fixed Budget C) Flexible Budget D) Master Budget

42. Which of the following is a key component of marginal costing, representing the difference between sales revenue and variable costs?

A) Profit B) Contribution Margin C) Net Income D) Gross Profit

43. If a company's contribution margin ratio is 40% and its fixed costs are $100,000, what is the break-even sales revenue?

A) $250,000 B) $40,000 C) $140,000 D) $60,000

44. In break-even analysis, a decrease in selling price per unit (with other factors constant) will:

A) Decrease the break-even point B) Increase the break-even point C) Not affect the break-even point D) Make the break-even point impossible to calculate

45. Which of the following is a key difference between Funds Flow Statement and Cash Flow Statement?

A) FFS includes non-fund items, CFS does not B) CFS includes non-cash items, FFS does not C) FFS focuses on working capital changes, CFS focuses on cash receipts and payments D) CFS is mandatory, FFS is optional

46. Under AS 3, cash flows arising from the acquisition and disposal of property, plant, and equipment are classified as:

A) Operating activities B) Investing activities C) Financing activities D) Contingent activities

47. Which of the following is typically NOT included in a cash budget?

A) Cash sales B) Collection from debtors C) Depreciation expense D) Payment to creditors

48. A flexible budget adjusts for changes in:

A) Fixed costs B) Selling price C) Activity level D) Product mix

49. What is the primary purpose of a performance budget?

A) To control cash inflows and outflows B) To plan future operations based on expected results C) To measure the performance of various departments or functions D) To prepare a consolidated financial statement

50. In marginal costing, the profit is directly related to:

A) Sales volume B) Fixed costs C) Total variable costs D) Contribution margin

Funds flow statement, cash flow statement as per AS 3, budgets and budgetary control, marginal costing and break-even analysis - Online Test

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