what is income statement

An income statement, also known as a profit and loss account, is a financial statement that shows a companys revenues and expenses during a particular period. It indicates how the revenues are transformed into the net income or net profit, which is the result after all revenues and expenses have been accounted for. The purpose of the income statement is to show managers and investors whether the company made money (profit) or lost money (loss) during the period being reported. An income statement represents a period of time, usually a quarter or a year, and is one of the three major financial statements, along with the balance sheet and the cash flow statement, that report a companys financial performance over a specific accounting period. The income statement focuses on the revenue, expenses, gains, and losses of a company during a particular period. It is an integral part of the company performance reports that must be submitted to the U.S. Securities and Exchange Commission (SEC) . Income statements may help investors and creditors determine the past financial performance of the enterprise, predict the future performance, and assess the capability of generating future cash flows using the report of income and expenses. An income statement is a key financial document for a business, and it shows what the company earns, what it spends, and if its making a profit over a specific period of time. It is also an important tool for managing a business and planning a strategy. The income statement is used by lenders, investors, and other partners to gauge a companys financial performance and make decisions that can affect the companys future.