The interest paid on bank loans is included in the operating activities section of the statement of cash flows. This is the case for both short-term and long-term bank loans. However, the principal amounts that were borrowed and the amounts that were repaid are reported separately under financing activities.

Under the indirect method, the interest expense is part of the corporation’s net income which then gets adjusted to the cash amount. The amount of interest paid is required to be disclosed separately and is usually shown at the bottom of the statement of cash flows or in the notes to the financial statements.

Learn more about the Cash Flow Statement.

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