Question

Statement I: Issue of Debentures will result in inflow of cash.
Statement II: Issue of Debentures to the vendors for purchase of machinery will result in outflow of cash.
Choose the correct option from the following:

Hint:

In financial statements, inflows from financing activities arise from issuing debt or equity, while outflows from investing activities occur when purchasing assets.

Answer 1

- Statement I is correct: The issue of debentures typically results in cash inflow, as it represents borrowing money from investors. - Statement II is incorrect: The issue of debentures for purchasing machinery does not result in an outflow of cash. Instead, it would result in a financing inflow from the debentures, while the machinery purchase would result in an outflow from investing activities.