Question

Statement I: In case of non-financial enterprises, payment of interest and dividend are classified as financing activities. Statement II: In case of financial enterprises, payment of interest and dividend are classified as investing activities. Choose the correct option from the following:

• A. Both the statements are true.
• B. Both the statements are false.
• C. Statement I is true, but Statement II is false.
• D. Statement I is false, but Statement II is true.

Hint:

Classification of Interest and Dividend:

• Non-financial enterprises:
  • Interest/Dividend \textbf{Paid} \(\Rightarrow\) Financing Activity
  • Interest/Dividend \textbf{Received} \(\Rightarrow\) Investing Activity
• Financial enterprises:
  • Interest/Dividend \textbf{Paid and Received} \(\Rightarrow\) Operating Activity (core business)

Dividend paid is always financing activity for all enterprises!

Answer 1

The Correct Option is C