The interest paid on short-term bank loans is included in the operating activities section of the statement of cash flows.

Short term loans and advances fall under the category of financing activities in the preparation of a cash flow statement. Financing activities are those activities that involve obtaining or repaying funds to finance the operations and growth of a business. In the case of short term loans and advances, these activities specifically relate to borrowing or lending money for a short period of time.

Financing Activities:
- Financing activities refer to the transactions that involve changing the size and composition of a company's equity and debt capital.
- These activities include obtaining cash from creditors (such as banks and financial institutions) and repaying the principal amount borrowed.
- Financing activities also encompass the issuance and repurchase of the company's own equity shares, payment of dividends, and any other activities that result in changes in the company's capital structure.

Short Term Loans and Advances:
- Short term loans and advances are financial instruments that have a maturity period of less than one year.
- These loans are typically used to meet short-term funding requirements, such as managing working capital, purchasing inventory, or covering operational expenses.
- Short term loans can be obtained from various sources, including banks, financial institutions, and trade creditors.
- Advances, on the other hand, are amounts paid in advance for goods or services that will be received in the future.

Classification in Cash Flow Statement:
- In the cash flow statement, short term loans and advances are reported under the financing activities section.
- The cash inflows from short term loans are classified as a source of cash and are reported as positive figures.
- Conversely, the cash outflows related to the repayment of short term loans or advances are considered uses of cash and are reported as negative figures.

Significance in Cash Flow Analysis:
- Analyzing the cash flows from financing activities, including short term loans and advances, helps in assessing the company's ability to generate cash from external sources and its capacity to repay its obligations.
- It provides insights into the company's financial health, liquidity position, and its ability to fund its short-term needs.
- By evaluating the cash flow statement, investors, creditors, and other stakeholders can make informed decisions regarding the financial stability and performance of the business.

In conclusion, short term loans and advances are categorized as financing activities in the preparation of a cash flow statement. These activities involve borrowing or lending money for a short period of time, and their classification in the cash flow statement helps in understanding the company's cash flows and financial position.