Question:
In case of a non-financial enterprise, payment of dividend is considered as a/an:
In case of a non-financial enterprise, payment of dividend is considered as a/an:
Updated On: Jul 19, 2025
- Operating Activity
- Investing Activity
- Financing Activity
- Both Investing and Financing Activity
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The Correct Option is C
Solution and Explanation
According to AS-3 (Revised) on Cash Flow Statements:
Financing Activities include transactions that result in changes in the size and composition of the owner’s capital and borrowings of the enterprise.
For a non-financial enterprise, dividend paid to shareholders is classified as a cash outflow under financing activities because it is a distribution of profits to equity holders.
This is different from a financial enterprise (like a bank), where interest and dividends may be treated differently.
Dividend received = investing activity
Dividend paid = financing activity
Hence, payment of dividend in a non-financial enterprise is a financing activity.
Financing Activities include transactions that result in changes in the size and composition of the owner’s capital and borrowings of the enterprise.
For a non-financial enterprise, dividend paid to shareholders is classified as a cash outflow under financing activities because it is a distribution of profits to equity holders.
This is different from a financial enterprise (like a bank), where interest and dividends may be treated differently.
Dividend received = investing activity
Dividend paid = financing activity
Hence, payment of dividend in a non-financial enterprise is a financing activity.
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