Question

JOURNAL
Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
2025 April 1	Debentures Application and Allotment A/c   ....Dr.		9,00,000	-
	Loss on Issue of Debentures A/c   ...Dr.		2,00,000	-
	To 8% Debentures A/c		-	10,00,000
	To Premium on Redemption of Debentures A/c		-	1,00,000
	(Issue of 10,000, 8% Debentures)
2026 March 31	Securities Premium A/c   ...Dr.		2,00,000	-
	To Loss on Issue of Debentures A/c		-	2,00,000
	(Loss on issue of debentures written off)

What will be the effect of writing off loss on issue of debenture on:

1. Cash Flow from Operating Activities, and
2. Cash Flow from Financing Activity?

Answer 1

1. There will be no effect because writing off the loss against the Securities Premium Account is a pure non-cash transaction that does not pass through the Statement of Profit and Loss, meaning the operating net profit remains completely unchanged.
2. There will be no effect because this is simply an internal accounting book adjustment between a reserve account and a deferred asset account that does not involve any actual movement of cash or cash equivalents.