Question

Dividend received is

• A. Operating activity
• B. Financing activity
• C. Investing activity
• D. Cash and cash equivalents

Answer 1

The Correct Option is C

Accounting categorizes financial activities into three primary areas: operating, investing, and financing. Accurate classification of transactions within these categories is crucial when analyzing the cash flow statement.

Investing activities encompass transactions concerning the purchase and sale of long-term assets and investments outside of cash equivalents. Common examples include selling investments, acquiring fixed assets, and receiving dividends.

Dividends received are classified as investing activities as they signify a return on investment from financial assets. Consequently, during the preparation of a cash flow statement, dividends received are documented within the investing activities section.

Based on the provided choices, the correct classification for dividends received is:

• Operating activity
• Financing activity
• Investing activity
• Cash and cash equivalents

The correct classification is Investing activity.