Ownclasses

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

In normal case dividend received on investment will be treated as an investment activity. But as this company is a financing company, which is primarily engaged in lending or borrowings of fund, the dividend received on investment is to be written under operating activity. Hence accountant is wrong.