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JAIIB · Accounting & Financial Management · Module B — Preparation of Financial Statements

JAIIB AFM Unit 16 — Cash Flow and Funds Flow: Free MCQs with Explanations

By Swarnakshi Jha (ex-banker) · Updated 20 September 2026 · Paper 3 of the November 2026 cycle (28 November 2026)

This page is a free slice of our JAIIB AFM question bank for Unit 16 — Cash Flow and Funds Flow (Module B — Preparation of Financial Statements). The Mock Centre holds 77 questions on this unit alone, every one with a why-right / why-wrong explanation; below are the facts examiners keep returning to, five of those questions to try, and the traps that cost marks.

AFM · Module B77 MCQs in the Mock Centre5 free belowPaper on 28 November 2026

Key facts examiners test from this unit

  1. Cash flow statement shows what the P&L cannot: WHERE cash came from and went — profit ≠ cash (wheat-trader Days 1/2/3: +5,000 / −10,000 / −5,000).
  2. Three activities: Operating (trading, tax, trading-securities), Investing (plant, control of subsidiaries), Financing (debentures, dividends paid, buy-back).
  3. Standards: AS-3 / Ind AS-7; no single prescribed format; indirect method = profit + depreciation ± working-capital changes (EBIT 50,000 + 10,000 + 6,000 − 4,000 = 62,000).

5 free practice questions — tap an option

Five basic questions from this unit. Answers lock on the first tap, exactly as in the exam, and a short explanation opens underneath. The Mock Centre adds the moderate and tough questions, why every other option is wrong, the concept capsule and the exam tip — with your score and revision dates tracked.

Question 1 of 5
Purchasing goods for resale falls under which activity?
Why (c): Buying goods for resale is a principal revenue-producing activity — OPERATING.
Question 2 of 5
Is there a single 'prescribed format' for the cash flow statement?
Why (b): NO rigid format is prescribed — presentation adapts to the entity's activities within the operating/investing/financing skeleton.
Question 3 of 5
The information for preparing a funds flow statement mainly comes from:
Why (b): Funds flow is read from the COMPARISON OF TWO SUCCESSIVE BALANCE SHEETS (plus P&L details like depreciation and dividends).
Question 4 of 5
Sale of an old machine for cash is classified in the cash flow statement as:
Why (b): Disposal proceeds of long-term assets are INVESTING inflows — the mirror of buying plant.
Question 5 of 5
Which activity classification is correct for a MANUFACTURING company's purchase of shares of another company as a long-term investment?
Why (b): Acquiring long-term investments is an INVESTING outflow for a non-financial company.
0 of 5 answered.

Traps in this unit

Confusable AConfusable BThe difference
ProfitCash generationP&L result vs actual cash movement — the unit's founding contrast
OperatingInvesting (securities)Trading/dealing securities vs long-term investments
Practise all 77 questions on Unit 16. The free demo opens a slice of every subject with the same explanations; the AFM Online-only pass unlocks all 1,681 AFM questions, the full and module mocks, Smart Revision and the Readiness Score for one year (₹1,299). Not sure where you stand? Take the free 10-question test first.
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Independent study aid — not affiliated with, endorsed by, or sponsored by the Indian Institute of Banking & Finance (IIBF). Exam pattern, dates, fees and passing criteria are set by IIBF — always confirm the current rules at iibf.org.in. Regulatory figures verified as of September 2026; verify from official sources before relying on them in practice.