When preparing a statement of cash flows using the direct method, a net loss reported on the income statement will
A) automatically result in a cash outflow from operating activities.
B) be included in financing activities.
C) be disclosed as a note to the statement of cash flows.
D) not be included on the statement at all.

Question

Quizplus · Accepted Answer

The direct method of preparing a statement of cash flows focuses on the major classes of gross cash receipts and payments. A net loss from the income statement does not directly appear in the cash flow statement under the direct method; instead, the effects of transactions that caused the net loss are reflected in the cash flows from operating, investing, or financing activities based on the nature of each transaction.

When Preparing a Statement of Cash Flows Using the Direct