Question

During the year ended 31st March, 2025, H.P. Ltd. paid an interim dividend of ₹ 50,00,000. From the following, choose the correct option for the purpose of preparing 'Cash Flow Statement':

• A. ₹ 50,00,000 paid as interim dividend during the year will be shown as outflow of cash under financing activities and added back to net profit to calculate cash flows from operating activities.
• B. ₹ 50,00,000 paid as interim dividend during the year will be shown as outflow of cash under financing activities and deducted from net profit to calculate cash flows from operating activities.
• C. ₹ 50,00,000 paid as interim dividend during the year will be shown as cash outflow from financing activities only.
• D. ₹ 50,00,000 paid as interim dividend during the year will be added back to net profit to calculate cash flows from operating activities only.

Hint:

In Cash Flow Statement (Indirect Method):

• Dividend paid is a Financing Activity outflow.
• If dividend was charged as expense in P\& L (like interim dividend sometimes treated), add it back in Operating Activities.
• If dividend is appropriation of profit, no adjustment in Operating Activities.

Always check how dividend is treated in the Profit \& Loss Account!

Answer 1

The Correct Option is A