A company reported a net loss of $30,000 for 2014, 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 is designed to explain changes in cash balances between two periods. It will show where cash was received from or used during the year, including operating, investing, and financing activities. Even though the company reported a net loss on the Income Statement, it is possible that they had positive cash flows from operating activities or received cash from financing or investment activities, which led to an increase in their cash balance.

A Company Reported a Net Loss of $30,000 for 2014