Accountancy Part BCash Flow Statement

Surya Housing Finances Ltd gave ₹20,00,000 to Chand Construction Hous…

Surya Housing Finances Ltd gave ₹20,00,000 to Chand Construction House as cash advance. In the books of Surya Housing Finances Ltd, the transaction will lead to....................

Answer & explanation

Correct answer: option 2

The correct answer is Option (2) → Cash outflow from operating activities

Lending is the main business of a housing finance company. AS-3 therefore treats cash advances and loans made by a financial enterprise as operating activities. Money paid out is an outflow, so the advance of ₹20,00,000 is a cash outflow from operating activities.

For a non-financial company the same advance would have been an investing outflow.

NCERT (2026-27 edition):
Cash from Operating Activities – “… An enterprise may hold securities and loans for dealing or for trading purposes. In either case they represent Inventory specifically held for resale. Therefore, cash flows arising from the purchase and sale of dealing or trading securities are classified as operating activities. Similarly, cash advances and loans made by financial enterprises are usually classified as operating activities since they relate to main activity of that enterprise.”