CASH FLOW STATEMENTS IN ACCOUNTING AND FINANCE
EXAM PAPER 1 (FOUNDATION LEVEL) – 40 QUESTIONS
WITH VERIFIED ANSWERS & DETAILED EXPLANATIONS |
TEST BANK 2026
COURSE NAME
Accounting and Finance – Financial Statements
LEVEL
Foundation Level
SHORT INTRODUCTION
This foundation-level cash flow statements exam paper introduces learners to the
basic principles of cash flow reporting in accounting and finance. It focuses on
understanding cash inflows and outflows, classification of activities, and
interpretation of simple cash flow information. The paper is structured to build
strong conceptual understanding through structured questions, verified answers,
and clear explanations.
INSTRUCTIONS
• Answer all 40 questions
• Section A: Multiple Choice Questions
• Section B: Short Answer Questions
• Section C: Scenario-Based Questions
• Section D: Analytical Questions
• Each question includes an answer followed by an explanation in italics
• Suggested time: 2 hours
• Use for revision and exam preparation
, SECTION A: MULTIPLE CHOICE QUESTIONS (1–15)
1. A cash flow statement shows:
A. Profit only
B. Cash inflows and outflows
C. Assets only
D. Liabilities only
Answer: B
Explanation It records all cash movements into and out of the business.
2. Operating activities include:
A. Buying equipment
B. Selling goods
C. Issuing shares
D. Loan repayment
Answer: B
Explanation Operating activities relate to core day-to-day business
operations.
3. Investing activities include:
A. Paying wages
B. Buying machinery
C. Paying rent
D. Paying tax
Answer: B
Explanation Investing activities involve long-term asset acquisition.
4. Financing activities involve:
A. Selling goods
B. Borrowing money
C. Paying suppliers
D. Buying stock
Answer: B
Explanation Financing activities relate to capital and funding sources.
5. A cash flow statement is important because it shows:
A. Profit
B. Liquidity
C. Marketing strength
D. Production efficiency
Answer: B
Explanation It shows the ability of a business to meet short-term obligations.
EXAM PAPER 1 (FOUNDATION LEVEL) – 40 QUESTIONS
WITH VERIFIED ANSWERS & DETAILED EXPLANATIONS |
TEST BANK 2026
COURSE NAME
Accounting and Finance – Financial Statements
LEVEL
Foundation Level
SHORT INTRODUCTION
This foundation-level cash flow statements exam paper introduces learners to the
basic principles of cash flow reporting in accounting and finance. It focuses on
understanding cash inflows and outflows, classification of activities, and
interpretation of simple cash flow information. The paper is structured to build
strong conceptual understanding through structured questions, verified answers,
and clear explanations.
INSTRUCTIONS
• Answer all 40 questions
• Section A: Multiple Choice Questions
• Section B: Short Answer Questions
• Section C: Scenario-Based Questions
• Section D: Analytical Questions
• Each question includes an answer followed by an explanation in italics
• Suggested time: 2 hours
• Use for revision and exam preparation
, SECTION A: MULTIPLE CHOICE QUESTIONS (1–15)
1. A cash flow statement shows:
A. Profit only
B. Cash inflows and outflows
C. Assets only
D. Liabilities only
Answer: B
Explanation It records all cash movements into and out of the business.
2. Operating activities include:
A. Buying equipment
B. Selling goods
C. Issuing shares
D. Loan repayment
Answer: B
Explanation Operating activities relate to core day-to-day business
operations.
3. Investing activities include:
A. Paying wages
B. Buying machinery
C. Paying rent
D. Paying tax
Answer: B
Explanation Investing activities involve long-term asset acquisition.
4. Financing activities involve:
A. Selling goods
B. Borrowing money
C. Paying suppliers
D. Buying stock
Answer: B
Explanation Financing activities relate to capital and funding sources.
5. A cash flow statement is important because it shows:
A. Profit
B. Liquidity
C. Marketing strength
D. Production efficiency
Answer: B
Explanation It shows the ability of a business to meet short-term obligations.
