Explanation:

Explanation:

When debentures are converted into equity shares, the company is not receiving or paying any cash. Instead, it is simply restructuring its liabilities by replacing a fixed-interest debt instrument (debenture) with an ownership instrument (equity share).

This transaction does not involve any cash flow, as no money is moving into or out of the company. Instead, it results in:

1. A reduction in the liability (debentures are removed from the books).
2. An increase in equity capital (new shares are issued to debenture holders).

Journal Entry for Debenture Conversion:

 Debenture A/C Dr.
To Equity Share Capital A/C

Since this transaction does not involve any cash movement, the correct answer is "No flow of cash."

Why Not Other Options?

• Option A (Inflow of cash) 

  • There is no cash coming into the company. Instead, it is an internal adjustment of liabilities to equity.

• Option C (Outflow of cash) 

  • No money is leaving the company. The debenture holders are given shares instead of cash.

• Option D (Cash and Cash equivalents) 

  • This transaction does not affect cash or cash equivalents. It is a non-cash financing activity.

Final Answer:

 B: No flow of cash