Future Business Leaders of America (FBLA) Agribusiness Practice Test

What is an income statement primarily used for?

1. A summary of revenues and expenses over a given period of time

2. A detailed account of a business’s physical assets

3. A report of future revenues projected in a business plan

4. A record of employee payroll over time

The correct answer is: A summary of revenues and expenses over a given period of time

An income statement is primarily used to summarize the revenues and expenses of a business over a specified period, such as a quarter or a fiscal year. This financial statement provides a clear view of the company's performance during that time, highlighting how much money was earned and how much was spent. The net result of these revenues and expenses determines the business's profit or loss for the period, making the income statement a crucial tool for stakeholders, including management, investors, and creditors, to assess the company's financial health and operational efficiency. The other options do not align with the primary function of an income statement. A detailed account of a business’s physical assets would be captured in a balance sheet, while future revenue projections are typically found in forecasts or business plans. Lastly, payroll records pertain to employee compensation and would not relate to the income statement's summary of revenues and expenses. Each of these alternatives serves a different purpose in financial reporting and management, distinct from what the income statement provides.