Future Business Leaders of America (FBLA) Agribusiness Practice Test

Which of the following is an example of a budget type that might use an income statement format?

1. Comprehensive budget

2. Zero-based budget

3. Enterprise budget

4. Cash flow budget

The correct answer is: Enterprise budget

The choice of an enterprise budget as an example of a budget type that might use an income statement format is appropriate because an enterprise budget focuses on the projected revenues and expenses for a specific agricultural operation or business segment. This type of budget typically includes the expected income from selling crops or livestock and the associated costs of production, similar to how an income statement summarizes revenue and expenses. In creating an enterprise budget, producers or managers can analyze the profitability of a particular crop or livestock operation. The format closely resembles an income statement, as it highlights both income sources and the costs incurred to generate that income, enabling effective financial planning and decision-making. While other options like a comprehensive budget or zero-based budget may also present financial information, they typically do so with different emphases. A cash flow budget, for instance, focuses on the inflow and outflow of cash within a set period, rather than net income and expenses, making it distinct from an income statement format.