Question 1:-   Option B

While preparing cashflow statement, we categorise all cash flows into following 3 types:-

a) Cashflows from operating activities

b) Cashflows from Investing activities

c) Cashflows from financing activities

Cashflows from operating activities include all those cashflows which arise in the normal course of business and in day to day activities of the business.

Examples include cash sales, cash purchases, payment of salaries and wages, payment to creditors, receipts from debtors etc.

Cashflows from investing activities include all those cashflows associated with sale and purchase of assets and investments.

In the given question, option   a, c, d & e fall under cashflows from operating activities as they are necessary for day to day running of the business. Whereas purchase of new manufacturing machinery comes under investing activity as it is associated with purchase of assets.

The question asks us to identify the activity which doesnot come under operating activity.

Hence, option B is the correct answer.

Question 2:- Option A

This question is based on methods of depreciation.

Under straight line method of providing depreciation, the asset will be depreciated equally over its useful life.

Example:- If we assume cost of asset as 1,00,000$ and its useful life is 10 years.

Then depreciation per annum = 1,00,000/10 = 10,000$ per annum.

It means, we provide a depreciation of 10,000$ in each of the 10 years under straight line method of depreciation.

Accelerated depreciation method comes with an assumption that, any business shall use the asset more when it is new and its use gets gradually reduced as time passes by.

Hence, the entities provide more amount of depreciation in earlier years as its usage is more and less amount of depreciation in later years as its usage is less.

Hence we can say that, the depreciation provided under accelerated depreciation method will be higher in earlier years as compared to straight line method.

Hence, the answer will be option A.      In earlier years, straight line < accelerated deprecition.

Question 3:- Option A

Statement of changes in equity includes the changes in the following items:-

a) Changes in equity share capital (common stock)

b) Changes in reserves

c) Changes in preferred stock

Analysis of each option:-

Option a:- Increase of borrowing of the year will increase our debt. It doesnot result in change of either common stock or reserves or preferred stock. This doesn’t impact the equity of the company.

Hence, it is not reported in the statement of changes in equity.

Option B: Distribution of profits of the year will result in decrease in reserves. Hence it will be reported in statement of changes in equity.

Option C:- Net profit of the year will result in increase in reserves. Hence it will be reported in statement of changes in equity.

Option D:- Increase of share capital of the year will result in increase in either common stock or preferred stock. Hence it will be reported in statement of changes in equity.

Option E:- The company and closing balances of equity will also be reported in statement of changes in equity.

Answer: Only Option A will not be reported in statement of changes in equity