Accounting · Cash Flow Statement
How does the accounting framework mandate the treatment of proposed dividends and the subsequent reporting of the previous year's declared dividend in a cash flow statement?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1They are treated as current liabilities; once declared, the previous year's dividend is deducted from operating profits and shown as an investing outflow.
- 2They are treated as contingent assets; once declared, the previous year's dividend is added back to operating profits and shown as an operating outflow.
- 3They are treated as non-current liabilities; once declared, the previous year's dividend is subtracted from operating profits and shown as a financing inflow.
- 4They are treated as contingent liabilities; once declared, the previous year's dividend is added back to operating profits and shown as a financing outflow.✓
Correct answer
They are treated as contingent liabilities; once declared, the previous year's dividend is added back to operating profits and shown as a financing outflow.
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