Classify the following activities into (i) Operating Activities, (ii) Investing Activities, and (iii) Financing Activities in case of (a) a Financial Enterprise, and (b) a Non-Financial Enterprise:
1. Purchase of securities fo a company.
2. Brokerage paid for the purchase fo securities.
3. Sale of securities of a Company.
4. Loans and advances made.
5. Receipts from the repayments of loans and advances.
6. Interest received on securities.
7. Dividend received on securities.
8. Interest paid on borrowings.
9. Dividend paid to shareholders.

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Solution

(a) In case of a Financial Enterprise, All the transactions except No. 9, shall be classified as Operating Activities since they relate to the main revenue - producing activity of a financial enterprise. Transaction No. 9, i.e., Dividend paid to shareholders shall be classified as Financing Activity.
(b) In case of a Non - Financial Enterprise, all the transaction except No. 8 and 9, shall be classified as Investing Activities since they relate to acquisition and disposal of long - term assets. Transactions No. 8 and 9 (i.e., interest paid and dividend paid) shall be classified as Financing Activity.

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