A company reported a net loss of $30,000 for the current year, yet its cash balance increased during the year. Which financial statement should management refer to for an explanation of this situation?
A)Balance Sheet
B)Income Statement
C)Statement of Retained Earnings
D)Statement of Cash Flows

Question

Quizplus · Accepted Answer

The Statement of Cash Flows shows the inflows and outflows of cash during the period, including operating, investing, and financing activities. It will show if there were any non-cash expenses, such as depreciation, that affected the net loss in the Income Statement, but did not affect the cash balance. Additionally, it will show how changes in accounts receivable, accounts payable, and inventory affected the cash balance. Therefore, the Statement of Cash Flows is the best choice for explaining how the cash balance increased despite a net loss.

A Company Reported a Net Loss of $30,000 for the Current