Answer to Question #137072 in Accounting for abbos

Question

Pulse, a dance club, saw a $40,000 drop in revenue during 2020 due to the Covid-19 virus. How will this affect the 2020 incomes statement, balance sheet, and statement of cash flows? What if anything will be affected and by how much?

Answer 1

In the income statement, the revenue drop will decrease the total revenue hence decreasing the net profits attained.

In the balance sheet, the drop in revenue will not affect anything.

In the cashflow statement, there will be reduction in cash flows from operating activities due to decreased net profits in the income statement.

The net profit will drop by $40,000 and therefore income statement and cash flow statement will be affected by the same amount.