Question

Shyam Sunder Ltd. is a financing company. Under which of the following activity will the amount of ‘Interest paid on loan’ be shown:

• A. Investing activity
• B. Financing activity
• C. Both Financing \& Operating activity
• D. Operating activity

Hint:

For non-financing companies, interest paid is classified as a financing activity. For financing companies, it falls under operating activities.

Answer 1

The Correct Option is D

As per the AS-3 (Revised) guidelines, interest paid by a financing company is considered an operating activity because it directly relates to the core operations of the business.