Accountancy Part BCash Flow Statement

Cash advances and loans made by financial enterprises are usually cla…

Cash advances and loans made by financial enterprises are usually classified as ______ activity.

Answer & explanation

Correct answer: option 2

The correct answer is Option (2) → Operating Activity

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.”