Accountancy Part BCash Flow Statement

A dividend paid by a non-finance company is:

Answer & explanation

Correct answer: option 3

The correct answer is Option (3) → Financing Activity

For a non-financial enterprise, AS-3 classifies payment of dividend (and interest) as a financing activity, because it is the return paid to the providers of capital. Receipt of dividend and interest is an investing activity.

Option (1) Operating Activity — Incorrect. Dividend paid is not part of the main revenue-earning activity.

Option (2) Investing Activity — Incorrect. Dividend received is investing; dividend paid is financing.

Option (3) Financing Activity — Correct.

Option (4) Cash & Cash Equivalents — Incorrect. This is not an activity at all.

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.”