Question:medium

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Statement II: 'Cash withdrawn from bank' will result in inflow of cash.
In the context of the above two statements, choose the correct option:

Show Hint

Bonus shares do not impact cash flow as they are an internal transfer. Similarly, withdrawing cash from a bank is a movement within cash accounts, not an inflow or outflow.
Updated On: Jan 13, 2026
  • Both statement I and statement II are correct
  • Both statement I and statement II are incorrect
  • Statement I is correct and statement II is incorrect
  • Statement I is incorrect and statement II is correct
Show Solution

The Correct Option is B

Solution and Explanation

Statement I is incorrect. Issuing bonus shares from securities premium does not generate cash inflow; it is merely a reclassification from securities premium to share capital. Statement II is incorrect. Withdrawing cash from a bank does not constitute a cash inflow as it is a transfer of existing cash from the bank to the business, without altering the overall cash balance.
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