A company reported net income of $150,000 for Year 1,but its cash balance decreased by $40,000.Which financial statement should management refer to for an explanation of this situation?

Question

Quizplus · Accepted Answer

The decrease in cash balance suggests that there were cash outflows during Year 1 that were not captured in the net income reported on the income statement. The statement of cash flows provides a reconciliation of the changes in cash during the period and will reveal the sources and uses of cash that caused the decrease in cash balance.

A Company Reported Net Income of $150,000 for Year 1,but