Assertion Reason MCQs of Cash Flow Statement Class 12

Looking for important assertion reason MCQs of Accounting Ratios chapter of Accountancy class 12 CBSE, ISC, CUET, and State Board

We have compiled very important assertion reason multiple-choice questions in the Accounting Ratios chapter of Accountancy class 12

Assertion Reason Multiple Choice Questions of Cash Flow Statement of class 12 CUE Accountancy CUET

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Assertion:- Cash Flow Statement shows inflow and outflow of Cash and Cash Equivalents under Operating, Investing, and Financing Activities of a company during a specified period.

Reason (R): The cash Flow Statement traces the Flow of Cash and Cash Equivalents into and out of the business during an accounting period under Operating, Investing, and Financing Activities.

in the context of the above two statements, which of the following is correct.

a) Assertion (A) and Reson (R) are correct but the reason (R) is not the correct explanation of Assertion (A).
b) Both, Assertion (A) and Reason (R) are correct and Reason (R) is the correct explanation of Assertion (A)
c) Assertion (A) is correct but the Reason (R) is not correct
d) Both, Assertion (A) and Reason (R) are in incorrect

Ans – b)

Assertion (A): Purchase of Fixed Asset on ‘Long term Deferred Payment’ would result in outflow of cash.

Reason (R): There will be ‘No flow of cash’ as purchase of Fixed Asset on Long term Deferred Payment involves Non-Current Assets and Non-Current Liability (Long term deferred payment).

In the above context of above two statements, which of the following is correct?

a) Assertion (A) and Reson (R) are correct but the reason (R) is not the correct explanation of Assertion (A).
b) Both, Assertion (A) and Reason (R) are correct and Reason (R) is the correct explanation of Assertion (A)
c) Both, Assetion (A) and Reason (R) are not correct.
d) Assertion (A) is not correct but the Reason (R) is correct

Ans – d)

Assertion (A): ‘Sale of Property is an Operating Activity for a Real Estate Company.

Reason (R): Sale/Purchase of property is the Principal Revenue Producing Activity for a Real Estate Company.

a) Assertion (A) and Reson (R) are correct but the reason (R) is not the correct explanation of Assertion (A).
b) Both, Assertion (A) and Reason (R) are correct and Reason (R) is the correct explanation of Assertion (A)
c) Assertion (A) is correct but the Reason (R) is not correct
d) Both, Assertion (A) and Reason (R) are not correct

Ans – b)

Assertion (A): Non-cash transactions are not considered in preparing Cash Flow Statement.

Reason (R): Non-Cash transactions do not affect Cash and Cash Equivalnets.

in the context of above two statements, which of the following is correct?

a) Assertion (A) and Reson (R) are correct but the reason (R) is not the correct explanation of Assertion (A).
b) Both, Assertion (A) and Reason (R) are correct and Reason (R) is the correct explanation of Assertion (A)
c) Assertion (A) is correct but the Reason (R) is not correct
d) Both, Assertion (A) and Reason (R) are not correct

Ans – b)

Assertion (A): Cash Flow statement is a substitute for income statement.

Reason (R): Cash Flow Statement does not show Profit and Loss.

In the context of above two statements, which of the following is correct?

a) Assertion (A) and Reson (R) are correct but the reason (R) is not the correct explanation of Assertion (A).
b) Both, Assertion (A) and Reason (R) are correct and Reason (R) is the correct explanation of Assertion (A)
c) Only Assertion (A) is correct
d) Assertion (A) is not correct but the Reason (R) is correct

Ans – d)

Assertion (A): Cash deposited into bank will not result in Flow of Cash or Cash equivalents.

Reason (R): Cash deposited into bank is movement between items of Cash.

in the context of above two statements, which of the following is correct?

a) Assertion (A) and Reson (R) are correct but the reason (R) is not the correct explanation of Assertion (A).
b) Both, Assertion (A) and Reason (R) are correct and Reason (R) is the correct explanation of Assertion (A)
c) Assertion (A) is correct but the Reason (R) is not correct
d) Both, Assertion (A) and Reason (R) are not correct

Ans – b)

Assertion (A): Cash withdrawn from bank for office use will result in outflow of Cash and Cash Equivalents.

Reason (R): Cash withdrawn from Bank is movement between items of Cash.

in the context of above two statements, which of the following is correct?

a) Assertion (A) and Reson (R) are correct but the reason (R) is not the correct explanation of Assertion (A).
b) Both, Assertion (A) and Reason (R) are correct and Reason (R) is the correct explanation of Assertion (A)
c) Only Assertion (A) is correct
d) Only Reason (R) is correct

Ans – d)

Assertion (A): Purchase of Stock in Trade on credit will not result in Flow of Cash or Cash Equivalents.

Reason (R): Purchase of Stock in Trade on credit does not involve cash.

in the context of the above two statements, which of the following is correct?

a) Assertion (A) and Reson (R) are correct but the reason (R) is not the correct explanation of Assertion (A).
b) Both, Assertion (A) and Reason (R) are correct and Reason (R) is the correct explanation of Assertion (A)
c) Assertion (A) is correct but the Reason (R) is not correct
d) Both, Assertion (A) and Reason (R) are correct

Ans – b)

Assertion (A): Declaration of Proposed (Final) Dividend does not result in Flow of Cash.

Reason (R): It does not affect cash of the company since there is no payment or receipt in cash.

in the context of above two statements, which of the following is correct?

a) Assertion (A) and Reson (R) are correct but the reason (R) is not the correct explanation of Assertion (A).
b) Both, Assertion (A) and Reason (R) are correct and Reason (R) is the correct explanation of Assertion (A)
c) Only Assertion (A) is correct
d) Both, Assertion (A) and Reason (R) are not correct

Ans – d)

Assertion (A): Purchase of Goodwill is classified as Investing activity in case of all the enterprises

Reason (R): It does not affect cash of the company since there is no payment or receipt in cash.

in the context of above two statements, which of the following is correct?

a) Assertion (A) and Reson (R) are correct but the reason (R) is not the correct explanation of Assertion (A).
b) Both, Assertion (A) and Reason (R) are correct and Reason (R) is the correct explanation of Assertion (A)
c) Assertion (A) is correct but the Reason (R) is not correct
d) Assertion (A) is not correct but the Reason (R) is correct

Ans – c)

Assertion (A): ‘Redemption of Debentures’ will result in outflow of cash.

Reason (R): Redemption of Debentures decreases Cash and Cash Equivalents.

In the context of above two statements, which of the following is correct?

a) Assertion (A) and Reson (R) are correct but the reason (R) is not the correct explanation of Assertion (A).
b) Both, Assertion (A) and Reason (R) are correct and Reason (R) is the correct explanation of Assertion (A)
c) Assertion (A) is correct but the Reason (R) is not correct
d) Assertion (A) is not correct but the Reason (R) is correct

Ans – b)

Assertion (A): Cash equivalents are short-term, highly liquid investments that are readly convertible into known amounts of cash and which are subject to an insignificant risk of change in value.

Reason (R): Cash equivalents are held for the purpose of meeting short term cash commitments rather than for investment or other purposes.

In the context of above two statements, which of the following is correct?

a) Assertion (A) and Reson (R) are correct but the reason (R) is not the correct explanation of Assertion (A).
b) Both, Assertion (A) and Reason (R) are correct and Reason (R) is the correct explanation of Assertion (A)
c) Assertion (A) is correct but the Reason (R) is not correct
d) Both, Assertion (A) and Reason (R) are not correct

Ans – a)

Assertion (A): Interest received by a company on investments is a Financing Activity.

Reason (R): Interest received on Calls in Arrears by a company is a Financing Activity.

In the context of above two statements, which of the following is correct?

a) Assertion (A) and Reson (R) are correct but the reason (R) is not the correct explanation of Assertion (A).
b) Both, Assertion (A) and Reason (R) are correct and Reason (R) is the correct explanation of Assertion (A)
c) Assertion (A) is correct but the Reason (R) is not correct
d) Both, Assertion (A) and Reason (R) are not correct

Ans – c)

Assertion (A): Cash Flow Statements is historical in nature.

Reason (R): Cash Flow Statement prepared is based on Financial Statements which are historical in nature.

In the context of above two statements, which of the following is correct?

a) Assertion (A) and Reson (R) are correct but the reason (R) is not the correct explanation of Assertion (A).
b) Both, Assertion (A) and Reason (R) are correct and Reason (R) is the correct explanation of Assertion (A)
c) Assertion (A) is correct but the Reason (R) is not correct
d) Assertion (A) is not correct but the Reason (R) is correct

Ans – b)

Assertion (A): Movement between the items that are part of Cash or Cash Equivalents doesn’t result into cash flow.

Reason (R): These are the components of the Cash and Cash Equivalents.

In the context of above two statements, which of the following is correct?

a) Assertion (A) and Reson (R) are correct but the reason (R) is not the correct explanation of Assertion (A).
b) Both, Assertion (A) and Reason (R) are correct and Reason (R) is the correct explanation of Assertion (A)
c) Assertion (A) is correct but the Reason (R) is not correct
d) Assertion (A) is not correct but the Reason (R) is correct

Ans – b)