Definition: Reports the total revenues, gains, expenses, losses, net income/loss, and other totals for the period of time shown in the heading of the statement. This report shows what profit or loss a business has made over a specific period of time.
Also referred to as the Profit and Loss Statement, statement of Income, and the statement of Operations, it is one of the most important financial statements for a business.
The income statement describes how successful the operations of the business are. The main objective is to make a profit, and the statement displays the extent to which it has been successful.
Typically companies display their income statement in a particular format. The revenues made by the business appear at the top, and the costs involved in generating that revenue just below. Revenue – Costs = Profit, therefore profit/loss is displayed at the bottom of the report.