Confused, what is the treatment of short-term loans and advances in cash flow statement in class 12 accountancy.
Short Term Loans and advances treatment in Cash Flow Statement
Short-term loans and advances are treated as the current assets of the firm.
If we talk about the nature of short-term loans and advances. it is treated as an investing activity. The short-term loans and advances are the amount that is given by the firm to others as loans and advances.
Such an amount earned interest for the firm.
The decrease in Short term loans and advances is added as an inflow in investing activities.
The increase in short-term loans and advances is deducted as an outflow in investing activities.
If there is interest against it, it is added as an inflow in investing activities.