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if in the current liabilities the balance of the bank goes up, isn’t that an overdraft and an increase in the same can be treated as a source of finance and an increase of the same under financing activity?right?
No. The objective of the cash flow statement is to show the reason the bank balance has moved from the opening amount to the closing amount. If the bank balance has gone from an overdraft to a bigger overdraft, there will be a net decrease in cash or cash equivalents.
At the bottom of the cash flow statement you will reconcile the opening cash and closing cash balances with the net increase or decrease in cash or cash equivalents and it will match. If you include increasing the overdraft as a financing cash flow this won’t work.
Financing cash flows are for issues or repayments of long term debt, issues of equity and payment of dividends (in reality other things can go in here but in the exam only these 4 things will go there).
Companies may use their overdraft as a source of finance, but it doesn’t belong in this section of the cash flow statement.
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