ICANFinancial AccountingStatement of Cash Flows2023

Pursuant to IAS 7, dividends paid by an entity may be classified in the statement of cash flows as:

AFinancing activities only, with no permitted alternative
BOperating activities only, with no permitted alternative
CEither operating or financing activities, as an accounting policy choice applied consistentlyCORRECT
DEither investing or financing activities, as an accounting policy choice applied consistently
AI
Toaster Teacher
Why the answer is C, and why the others tempt you.
IAS 7 paragraph 34 permits dividends paid to be classified as either a financing cash flow (because they are a cost of obtaining financial resources) or as an operating cash flow (to help users determine the ability to pay dividends from operating cash flows). The choice must be applied consistently and disclosed. Investing activities is not a permitted classification for dividends paid.
Want this in Pidgin, Yoruba, Igbo or Hausa? Sign up free →

Practice more Financial Accounting questions

ICAN Financial Accounting has thousands more questions like this — with Worked answers on every one.

Start practicing free →See all Financial Accounting questions