Chapter 4

Question 1

It is the spot exchange rate at the end of the reporting period

Answer 1

Closing rate

Question 2

It is the difference resulting from translating a give number of units of one currency into another currency at different exchange rate

Answer 2

Exchange difference

Question 3

It is the ratio of exchange between two currencies

Answer 3

Exchange rate

Question 4

It is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date

Answer 4

Fair value

Question 5

It is a currency other than the functional currency of entity

Answer 5

Foreign currency

Question 6

It is an entity that is a subsidiary, associate, joint agreement or branch of a reporting entity, the activities of which are based or conducted in a country or currency other than those of the reporting entity

Answer 6

Foreign operation

Question 7

It is the currency of the primary economic environment in which the entity operates

Answer 7

Functional currency

Question 8

It is the currency in which the financial statements are presented

Answer 8

Presentation currency

Question 9

These are units of currency held and assets and liabilities to be received or paid in a fixed determinable number of units of currency

Answer 9

Monetary items

Question 10

It is exchange rate for immediate delivery

Answer 10

Spot exchange rate

Question 11

Based on IAS 7, Cash comprises of

Answer 11

Cash on hand and demand deposits

Question 12

These are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk if changes in value

Answer 12

Cash equivalents

Question 13

These are inflows and outflows of cash and cash equivalents

Answer 13

Cash flows

Question 14

These are the principal revenue producing activities of entity

Answer 14

Operating activities

Question 15

These are the activities involving acquisition and disposal of long term assets and other investment not included in cash equivalents

Answer 15

Investing activities

Question 16

These activities that result in changes in the size and composition of the contributed equity and borrowings of the entity

Answer 16

Financing activities

Question 17

How are cashflows be classified in the statement of cashflows

Answer 17

Operating, investing and financing activities

Question 18

Give at least three examples of cash flows from operating activities

Answer 18

Cash receipts from the sale of goods and rendering of services
Cash receipts from royalties, fees and commission ps and other revenues
Cash payments to and on behalf of employees
Cash payments or refunds of income taxes unless they can be specifically identified with other activities
Cash receipts and payments from contracts held for dealing or trading purposes

Question 19

Give at least three examples of cash flows from investing activities

Answer 19

Cash payments to acquire long term assets
Cash payments from sales of long term assets
Cash payments to acquire equity or debt instruments of other entities and interest in joint ventures
Cash receipts from sale of equity or debt instruments of other entities and interest in joint ventures
Cash advances and loans to other parties
Cash receipts from the repayments of advances and loans to other parties
Cash payments for future contracts, forward contracts, option contracts and swap contracts
Cash receipts from future contracts, forward contracts, option contracts and swap contracts

Question 20

Give at least three examples of cash flows from financing activities

Answer 20

Cash proceeds from issuing debentures, loans, notes, bonds, mortgages and other short term or long term borrowings
Cash repayments of amounts borrowed
Cash payments by lessee for the reduction of the outstanding liability relating to a lease

Question 21

What are the two methods use to report cash flows from operating activities

Answer 21

Direct method and indirect method

Question 22

What is the normal and alternative classification of interest paid in the statement of cash flow

Answer 22

Operating; Financing respectively

Question 23

What is the normal and alternative classification of dividends receive in the statement of cash flow

Answer 23

Operating; Investing respectively

Question 24

What is the normal and alternative classification of dividends paid in the statement of cash flow

Answer 24

Financing; Operating respectively

Question 25

What is the usual classification of taxes arising on income in the statement of cash flow

Answer 25

Operating activity

Question 26

What is the classification of the aggregation cashflows arising from obtaining or losing of subsidiaries or other business

Answer 26

Investing activity

Question 27

How is cash being measured

Answer 27

At face value

Question 28

How is cash in foreign currency being measured

Answer 28

At current exchange rate

Question 29

How should the cash fund be classified under the following circumstances? A. Cash fund set aside for current operations
B. Cash fund set aside for non current purpose or payment of long term obligation
C. Cash fund set aside to purchase of non current asset

Answer 29

A. Cash and cash equivalent
B. Long term investment (non current)
C. Non current asset