Question

Bank overdraft of Asha Ltd. on 31st March, 2024, and 31st March, 2025, were ₹ 30,000 and ₹ 36,000 respectively. How will the change in Bank overdraft be shown in the Cash Flow Statement of Asha Ltd. for the year ended 31st March, 2025?

Options

• Add to Financing Activities

• Add to Operating Activities

• Less from Operating Activities

• Less from Financing Activities

Answer 1

Add to Financing Activities

Explanation:

As per Revised AS-3, Bank Overdraft is treated as a short-term borrowing and is part of Financing Activities. The balance increased from ₹ 30,000 to ₹ 36,000 (an increase of ₹ 6,000). An increase in overdraft means the company has borrowed more money, which results in a cash inflow. Therefore, it is added to Financing Activities.