## Special Classification: Financial vs Non-Financial Institutions
Some items are classified differently depending on whether the entity is a Financial Institution (e.g., a bank) or a Non-Financial Institution (e.g., a manufacturer).
### Summary Table
| Item | Non-Financial Institution | Financial Institution |
|---|---|---|
| Loans given to 3rd party | Investing | Operating |
| Interest earned on loans given to 3rd party | Investing | Operating |
| Loans taken from 3rd party | Financing | Operating |
| Interest paid on loans taken from 3rd party | Financing | Operating |
| Investments purchased (shares/debentures) | Investing | Operating |
| Dividend income from investments | Investing | Operating |
| Issue of shares | Financing | Financing |
| Dividend paid on shares | Financing | Operating or Financing |
### Universal Rules (Apply to ALL Entities)
These items are always Operating regardless of entity type:
| Item | Reason |
|---|---|
| Loans given to employees or suppliers | These arise from normal operations/trade relationships |
| Interest earned on such loans | Income from operational lending |
| Loans taken from customers or suppliers | Trade finance — part of working capital cycle |
| Interest paid on such loans | Cost of operational borrowing |
| Issue of shares | Always Financing (never Operating), for all entities |
| Investment in subsidiary shares | Always Investing (never Operating), for all entities |
### Mnemonic Framework
```
For NON-Financial Institution:
Money lent OUT to 3rd party → Investing (like buying an asset)
Money borrowed IN from 3rd party → Financing (raising capital)
For Financial Institution (Bank):
Lending IS the business → Operating
Borrowing IS the business → Operating
```