ARA Assignment Question

[Ematuro]

Hey guys, I'm a little stuck at the moment.

If you provide someone with an interest free loan, does it go into operating, investing or financing?
I'm thinking.. its not going to go into operating is it?
It could go into investing because by providing a loan you get a NCA.
Or.... would it be financing just because loans go there? I know loan acquisitions go here but I'm not sure about the situation where you are the one providing a loan.

Anyone help please?
Thanks.

[marr]

Ah yes, Matt Dyki loves throwing in dooseys in his first year accounting assignments. I haven't studied accounting beyond ARA and VCE Accounting so I'm probably not the best person to answer this but in my opinion it would be either investing or financing.

Is the business a bank or loaning company? If so would a loan count as a day to day transaction and thus be operating? Alhough it could also be investing because like you said it involves acquiring a NCA. Then again it might be financing because the income comes from outside the business (assuming the business isn't a bank or loaning company). My gut says investing.

Just remember that even if you label it wrong you'll still get marks if you can come up with a reasonable explanation.

[Ematuro]

Yeah I think its investing too. Wouldn't be operating - this business is just a wine company that is lending money to one of the owners who are having financial difficulties.
Thanks for the input