Question

Assertion (A): Conversion of 60,000, 8% debentures of ₹ 100 each into equity shares of ₹ 10 each at a 20% premium will not be considered in preparing cash flow statement. 

Reason (R): Non-cash transactions do not affect cash and cash equivalents.

In the context of the above two statements, which of the following is correct?

Options

• Both (A) and (R) are correct, and (R) is the correct reason of (A).

• Both (A) and (R) are correct, but (R) is not the correct reason of (A).

• Only (A) is correct.

• Both (A) and (R) are wrong.

Answer 1

Both (A) and (R) are correct, and (R) is the correct reason of (A).