A pro forma income statement:
A)is used to complete a common-size income statement.
B)forecasts revenue and expenses for a future period.
C)summarizes sales and expenditures for the previous year.
D)displays revenues and expenses for the past month.

Question

Quizplus · Accepted Answer

A pro forma income statement is a financial document that forecasts revenue and expenses for a future period, usually for the upcoming fiscal year. It is used to estimate the financial performance of a business, project potential profits or losses, and help with the budgeting process. Therefore, option B is the correct answer. Option A is incorrect because a common-size income statement expresses financial figures as a percentage of sales, and a pro forma income statement is not necessary to complete it. Option C is incorrect because the income statement summarizes sales and expenses for a past period, usually the most recent reporting cycle, while a pro forma income statement projects future financial results. Option D is incorrect because the pro forma income statement is not limited to showing revenues and expenses for the past month, but rather it forecasts future financial performance.

A Pro Forma Income Statement