Read the following information to answer.
Rathi Udyog, made a profit of 72,000 after charging depreciation of Rs. 17,000 on fixed assets and paid Rs. 10,000 as interim dividend. The goodwill amortized was Rs. 12,000 and profit (Gain) on sale of furniture was Rs. 2,500.
The other informations were :
Trade Payable showed an increase of Rs. 7,000.
Outstanding expenses showed a decrease of Rs. 5,000.
Accrued Income showed an increase of Rs. 8,000.
Trade payable showed a decrease of Rs. 10,000.
Inventories showed a decrease of Rs. 3,000.
On the basis of above information answer the following questions.
Apart from showing interim dividend in Net Profit before tax, where else it will be shown ?
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Financing Activity
Interim dividend is paid to the shareholders, the owners of the company. For a non-financial company, payment of dividend is a financing activity. So, after being added back to the profit, the interim dividend paid is shown as an outflow under financing activities.
Option (1) Operating Activity — Incorrect. Operating activities are the main revenue-earning activities. A dividend is a return to the owners, not a cost of running the business.
Option (2) Investing Activity — Incorrect. Investing activities are the purchase and sale of long-term assets and investments. Only dividend received on investments goes there, not dividend paid.
Option (3) Financing Activity — Correct. Paying dividend changes the owners’ funds, so it is a financing outflow.
Option (4) Cash and Cash Equivalent — Incorrect. Cash and cash equivalents are the cash balance and short-term liquid investments. A dividend paid is a flow of cash out of the business, not a part of that balance.
NCERT (2026-27 edition): |