Why short term borrowing like bank overdraft is considered as financing activity instead of operating activity? Why they are not treated similarly like creditors?
Dear Student
As per Provisions of Companies act 2013, and AS-3, there is a format of Cash flow statement in which Short term finance is considered in financing activity.
However, a general explanation for the same is:
Borrowings means to arrange funds or financing funds to operate business smoothly Since borrowings directly relates to the financing of funds, it is considered in Financing activity irrespective if it is short term or long term.
Hope this helps
Please get back to us in case of query
Keep posting
Regards
As per Provisions of Companies act 2013, and AS-3, there is a format of Cash flow statement in which Short term finance is considered in financing activity.
However, a general explanation for the same is:
Borrowings means to arrange funds or financing funds to operate business smoothly Since borrowings directly relates to the financing of funds, it is considered in Financing activity irrespective if it is short term or long term.
Hope this helps
Please get back to us in case of query
Keep posting
Regards