Question : How will you treat Bank Overdraft in a Cash Flow Statement?
Option 1: Bank Overdraft is short-term borrowing and will be treated as operating activity.
Option 2: Bank Overdraft is short-term borrowing and will be treated as financing activity.
Option 3: Bank Overdraft is short-term borrowing and will be treated as cash and cash equivalents
Option 4: None of the above
Correct Answer: Bank Overdraft is short-term borrowing and will be treated as financing activity.
Solution : Answer = Bank Overdraft is short-term borrowing and will be treated as financing activity.
Bank Overdraft is short-term borrowing and will be treated as financing activity. Financing activities are the activities which result in a change in size and composition of owners' capital and borrowing of the enterprise from other sources.
Hence, the correct option is 2.
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