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    Question

    An entity, other than a financial institution, receives

    the dividends from the shares it owns in certain companies. The entity, while preparing its cash flow statement, should disclose this as ______
    A Operating cash inflow Correct Answer Incorrect Answer
    B Investing cash inflow Correct Answer Incorrect Answer
    C Financing cash inflow Correct Answer Incorrect Answer
    D Cash & cash equivalent Correct Answer Incorrect Answer
    E Cash from Change in working capital Correct Answer Incorrect Answer

    Solution

    As per AS-3 and Ind AS 7, for entities other than financial institutions, dividends received are classified as cash inflows from investing activities, because they represent returns on investments in other entities.  Note – Cash flows which arise from dividends and interest received and paid in the case of financial entity must be categorized as cash flows from operating activities. 

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