Question

Issue of Bonus Shares is considered a Financing Activity while preparing the Cash Flow Statement. (True/False)

Answer 1

This statement is false.

Explanation:

The issue of bonus shares is a non-cash transaction that does not result in any actual cash inflow or outflow for the company. Bonus shares are simply issued by capitalising existing reserves and surplus, which rearranges the internal equity structure without affecting cash balances. Because a Cash Flow Statement strictly records actual movements of cash, the issuance of bonus shares is not shown anywhere on the statement, including under Financing Activities.