Question

Dividend received is

• A. Operating activity
• B. Financing activity
• C. Investing activity
• D. Cash and cash equivalents

Answer 1

The Correct Option is C

Classification of Dividend Income in Cash Flow Statement 

Dividend income, the income a company receives from its investments in the stock of other companies, is generally classified as an investing activity in the Statement of Cash Flows. However, there are exceptions depending on the specific accounting standards being followed.

Investing Activity Classification

When dividend income is classified as an investing activity, it reflects the returns generated from the company's investments in other entities. This classification aligns with the nature of investing activities, which involve acquiring and disposing of long-term assets and investments.

Alternative Classification (Operating Activity)

Some accounting standards (such as IFRS) allow dividend income to be classified as an operating activity if the dividends are closely related to the company's core business operations. For example, a financial institution that regularly invests in dividend-paying stocks as part of its operations may classify dividend income as an operating activity.

Key Consideration

The classification of dividend income depends on the nature of the investment and the applicable accounting standards. Companies must consistently apply their chosen classification method to ensure comparability and transparency in their financial reporting.

Summary

In most cases, dividend income is classified as an investing activity in the Statement of Cash Flows. But it can sometimes also be reported as an Operating activity depending on accounting standards and business.

Answer 2

Dividend Received Activity Classification 

Dividend received is classified as:

• Activity Type: Investing activity

Note: This classification is based on standard accounting practices for cash flow statements.