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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.Β  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.Β 

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