Funds flow statement is a financial document that analyses the movement of funds in an organisation and its effect on working capital. It uses the balance sheet of two consecutive terms to understand the inflow and outflow of funds from the previous financial year to the current year. This statement also helps a company conduct a funds flow analysis to utilise its funds efficiently.

Below is a list of multiple-choice questions and answers on the Funds Flow Statement to help students understand the topic better.

1. Funds flow statement is prepared on the basis of _________.
   1. Profit and loss account of the current year
   2. The balance sheet of the previous and current year
   3. Both a and b
   4. None of the above

Answer: c

2. Which of the following are sources of funds for an organisation?
   1. Conversion of debentures into shares
   2. Conversion of loans into shares
   3. Issue of shares against the purchase of fixed assets
   4. None of the above

Answer: d

3. Funds flow statement is also known as __________.
   1. Statement of sources and uses of funds
   2. Statement of sources and application of funds
   3. Statement of funds flow
   4. All of the above

Answer: d

4. The statement prepared while conducting funds flow analysis is called ________.
   1. Funds flow statement
   2. Schedule of changes in working capital
   3. Both a and b
   4. None of the above

Answer: c

5. Funds flow statement is prepared to ________________.
   1. Ascertain the item-wise outflow of funds in a given period
   2. Identify changes in working capital
   3. Identify reasons behind changes in working capital
   4. All of the above

Answer: d

6. Which of the following statements is not true?
   1. Funds flow statement is prepared on an accrual basis
   2. There is an inverse relationship between current assets and working capital
   3. Funds flow statement is also known as the statement of sources and application of funds
   4. All the above statements are true

Answer: a

7. Funds flow statement is based on the concept of ___________.
   1. Going concern
   2. Business entity
   3. Accounting period
   4. None of the above

Answer: a

8. The term ‘flow of funds’ means ___________.
   1. Change in working capital
   2. Change in funds
   3. Both a and b are incorrect
   4. Both a and b are correct

Answer: d

9. Funds flow analysis is important for ________.
   1. Financial management
   2. Quality control management
   3. Personnel management
   4. All of the above

Answer: a

10. Funds flow statement is a tool for _________.
    1. Performance analysis
    2. Cost control
    3. Financial analysis
    4. None of the above

Answer: c

11. A statement that shows periodic increase or decrease of funds is called _________.
    1. Working capital statement
    2. Cash flow statement
    3. Funds flow statement
    4. None of the above

Answer: c

12. Which of the following are current assets?
    1. Furniture
    2. Accounts receivable
    3. Fixed investments
    4. None of the above

    Answer: b

13. Which of the following are current liabilities?
    1. Accounts payable
    2. Bonds payable
    3. Deferred tax liabilities
    4. None of the above

Answer: a

14. A statement of change in a company’s financial position will not disclose the effect of ________.
    1. Cash dividends declared but not yet paid
    2. Share capital issued to acquire facilities
    3. Dividends declared on shares
    4. All of the above

Answer: c

15. If the total sources of funds are Rs. 2,00,000 and total application of funds are Rs. 2,50,000 then the working capital will ___________.
    1. Decrease by Rs. 50,000
    2. Increase by Rs. 50,000
    3. Not be affected
    4. None of the above

Answer: a

Also See:

• Difference between Cash Flow and Funds Flow
• Difference between Balance Sheet and Cash Flow Statement