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Question
Issue of Debentures for Consideration other than Cash is shown as ______.
Options
Inflow of Cash under Financing Activities.
Outflow of Cash under Financing Activities.
Neither Inflow nor Outflow of Cash.
Inflow of Cash under Operating Activities.
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Solution
Neither Inflow nor Outflow of Cash.
Explanation:
When debentures are issued for a consideration other than cash (such as purchasing machinery or acquiring a business), the transaction is simply an exchange of an asset for a non-current liability. Because no actual cash or cash equivalents are received or paid, it represents a non-cash transaction. According to accounting standards (AS 3/Ind AS 7), non-cash transactions are strictly excluded from the Cash Flow Statement, though they may be disclosed in the notes to accounts.
