Question

Which of the following statements is incorrect?

• A. Payment of dividend and interest will result in cash outflow from financing activities.
• B. Payment of employee benefit expenses will result in cash outflows from operating activities.
• C. Receipt of interest and dividend will result in cash inflow from financing activities.
• D. Operating activities are the principal revenue generating activities of the enterprise.

Hint:

Interest/dividends received = Investing inflow. Dividends paid = Financing outflow.

Answer 1

The Correct Option is C

According to AS-3: - Receipt of **interest/dividends** is treated as **investing activities**, **not financing**. - **(C)** is thus incorrect. - **(A)** is partially true for dividends (financing) but **interest paid** can be classified based on policy. - **(B)** and **(D)** are correct statements.