Question

Dividend paid is classified under which activity (as per AS-3 Revised)?

• A. Operating
• B. Financing
• C. Investing
• D. Trading

Hint:

According to AS-3 Revised, dividend payments (both received and paid) are classified under financing activities because they relate to how a company finances its operations and rewards its investors.

Answer 1

The Correct Option is B

Step 1: Understanding AS-3 Revised.
According to AS-3 Revised (Cash Flow Statement), dividend paid is classified as a financing activity. This is because it represents a distribution of profit to shareholders, which is related to the company’s financing decisions.
Step 2: Analysis of options.

• (A) Operating: Incorrect. Operating activities primarily relate to the core operations of the company, like revenues and expenses. Dividend paid does not fall under this category.
• (B) Financing: Correct. As per AS-3 Revised, dividend paid is classified under financing activities because it involves payments to shareholders, which is a financing decision.
• (C) Investing: Incorrect. Investing activities are related to the purchase and sale of assets like property, equipment, and securities. Dividend paid is not related to these activities.
• (D) Trading: Incorrect. Trading activities relate to buying and selling of goods and services in the course of business, which is unrelated to dividend payments.

Step 3: Conclusion.
Dividend paid is classified under financing activities as per AS-3 Revised. Final Answer:} Financing.