The correct answer is: C. i, iv, v
A funds flow statement is a financial statement that shows the sources and uses of cash and cash equivalents for a specific period of time. The sources of funds can be classified into three categories: operating activities, investing activities, and financing activities.
Operating activities are the day-to-day activities of a business that generate revenues and expenses. Examples of operating activities include selling goods and services, collecting cash from customers, and paying suppliers.
Investing activities are the activities that involve the purchase and sale of long-term assets, such as land, buildings, and equipment. Examples of investing activities include purchasing a new piece of equipment and selling an old piece of equipment.
Financing activities are the activities that involve the raising and using of capital. Examples of financing activities include issuing shares, borrowing money, and repaying loans.
The following are the correct statements as regards the sources of funds for a Funds Flow Statement:
- Increase in working capital is a source of funds because it represents an increase in the amount of cash and cash equivalents that a company has available.
- Issuing equity shares is a source of funds because it represents an increase in the amount of capital that a company has available.
- Charging depreciation on fixed assets is a source of funds because it represents a non-cash expense that reduces the company’s taxable income.
The following are incorrect statements as regards the sources of funds for a Funds Flow Statement:
- Decrease in working capital is a use of funds because it represents a decrease in the amount of cash and cash equivalents that a company has available.
- Writing off the intangible/fictitious assets is a use of funds because it represents a non-cash expense that reduces the company’s net income.
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