Shyam Sunder Ltd. is a financing company. Under which of the following activity will the amount of ‘Interest paid on loan’ be shown:
Show Hint
- Investing activity
- Financing activity
Both Financing & Operating activity
- Operating activity
The Correct Option is D
Solution and Explanation
1. Interest paid on loans is classified differently for financing and non-financing companies.
2. For a financing company (like Shyam Sunder Ltd.), interest paid on loans is considered an operating expense since earning and paying interest is part of its core business operations.
3. According to AS-3 (Cash Flow Statements), interest paid is classified as:
- Operating Activity for financial institutions and banks.
- Financing Activity for non-financial firms.
4. Since Shyam Sunder Ltd. is a financing company, the interest paid on loans will be classified under operating activities in the cash flow statement.
Thus, the correct answer is: (D) Operating activity.
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