Accountancy Part BCash Flow Statement

In case of a financial enterprise, interest paid is classified under…

In case of a financial enterprise, interest paid is classified under which activity while preparing Cash Flow Statement.

Answer & explanation

Correct answer: option 1

The correct answer is Option (1) → Operating activity

For a financial enterprise, lending and borrowing is the main business, so interest paid (and interest and dividend received) are operating cash flows; only dividend paid is a financing activity. For a non-financial enterprise, interest paid is a financing activity.

NCERT (2026-27 edition):
Interest and Dividend – “… In case of a financial enterprise (whose main business is lending and borrowing), interest paid, interest received and dividend received are classified as operating activities while dividend paid is a financing activity.”