Accountancy Part BCash Flow Statement

Dividend received by Hero Ltd. would be ______ activity

Hero Ltd, started a new venture of making casual shirts. The directors decided to issue 5,000,00 shares of Rs. 10 each at Rs. 12 each. The following assets were purchased by the company

A building of Rs. 10 lakhs
Furniture of Rs. 7 lakhs
Machinery of Rs. 2 lakhs

The company purchased cloth of Rs. 20 lakhs and paid wages Rs. 5,00,000 to the workers. The Directors also decided to buy 10,000 shares of TATA Ltd. of Rs. 10 each and at the end of the year Tata Ltd. Paid Rs. 10,000 as dividend

Answer & explanation

Correct answer: option 2

The correct answer is Option (2) → Investing

Hero Ltd. makes shirts, so it is a non-financial company. The Rs. 10,000 it receives as dividend on its TATA Ltd. shares is a return on an investment, so it is an inflow from investing activities.

NCERT (2026-27 edition):
Treatment of Some Peculiar Items – “… In case of a non-financial enterprise, as per AS-3, it is considered more appropriate that payment of interest and dividends are classified as financing activities whereas receipt of interest and dividends are classified as investing activities.”