Question

While preparing the Cash Flow Statement the accountant of Gulfam Ltd., a financing company showed Dividend received on Investments as Investing Activity. Was he correct in doing so? Give reason.

Answer 1

Dividend received on investments is cash flow from operating activities. Therefore, it is to be
categorised under 'Cash Flow from Operating Activities'. Thus, the accountant was incorrect in his
approach of showing it under 'Investing Activity'.