Cash Advance and Loan made to third party (other than made by financial enterprise) is
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → Outflow from Investing Activities
For a company whose business is not lending, giving cash advances and loans to others is a use of surplus funds, like buying an investment. Cash leaves the company, so it is an outflow from investing activities. Only for a financial enterprise, whose main business is lending, is it an operating activity.
Option (2) Outflow from Financing Activities — Incorrect. Financing activities deal with the company’s own capital and borrowings, not loans it gives to others.
Option (3) Inflow from Investing Activities — Incorrect. Giving a loan pays cash out; only its later repayment is an inflow.
Option (4) Inflow from Financing Activities — Incorrect. Cash goes out, and the activity is not financing.
NCERT (2026-27 edition):
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