A-AS Level (CIE) Accounting Paper-1: Specimen Questions with Answers 43 - 43 of 93

Question 43

Question

Match List-Ⅰ List-Ⅱ▾

Match the following:

List-ⅠList-Ⅱ
(A)

Decrease in current assets

(i)

More credit sales

(B)

Increase in current liabilities

(ii)

More credit purchases

(C)

Increase in current assets

(iii)

Less credit purchases

(D)

Decrease in current liabilities

(iv)

More collection from debtors

Choices

Choice (4)
  • (A)
  • (B)
  • (C)
  • (D)

a.

  • (iv)
  • (ii)
  • (i)
  • (iii)

b.

  • (i)
  • (ii)
  • (iv)
  • (iii)

c.

  • (iv)
  • (iii)
  • (ii)
  • (i)

d.

  • (ii)
  • (iii)
  • (i)
  • (iv)

Answer

a.

Explanation

  • Effect of decrease in current assets like debtors: Decrease in debtors indicates that collections from debtors are more than the amount of credit sales during the year, hence ₹ 20,000 should be added to operating profit for arriving at the figure of net cash generated from operating activities.
  • Effect of increase in current assets: Increase in debtors indicates that collections from debtors are less than the amount of credit sales during the year, hence $ 50,000 should be deducted from operating profit for arriving at the figure of net cash generated from operating activities.
  • Effect of decrease in current liabilities: the decrease in creditors should be deducted from operating profit for arriving at the figure of net cash generated from operating activities the same treatment is made for the decrease in other current liabilities.
  • Effect of increase in current liabilities such as creditors, B/P, Outstanding Expenses, Incomes received in advance etc. : the increase in creditors should be added to operating profit for arriving at the figure of net cash generated from operating activities.

🎯 Select Paper

Developed by: