Question

Harsh Ltd., a financing company, obtained loans and advances of ₹10,00,000 for the year @ 12% per annum. In which activity will it be included while preparing the Cash Flow Statement?

Hint:

For financing companies, interest-related cash flows are treated as Financing Activities.

Answer 1

For a financing company, loans and advances constitute its principal revenue-generating activity. Therefore, interest received or paid on loans and advances is classified under Financing Activities while preparing the Cash Flow Statement.