Question

Statement I: ‘Issue of fully paid bonus shares out of Securities Premium Account’ will result in inflow of cash.
Statement II: ‘Cash withdrawn from bank’ will result in inflow of cash.

Hint:

Analyze cash flow questions carefully: Transactions involving internal adjustments (e.g., bonus shares, cash withdrawn) do not lead to cash inflows or outflows.

Answer 1

- Statement I: The issuance of bonus shares, fully paid, does not generate cash inflow since it entails an internal equity transfer, not a cash transaction.
- Statement II: Withdrawing cash from the bank does not constitute a cash inflow as it represents a mere shift of funds between cash and bank accounts.