An income statement, also known as a profit and loss statement or P&L, is a financial statement that shows a company’s financial performance over a specific period of time, typically a quarter or a year. It shows the revenues, expenses, and profit (or loss) of a company during that period.
The income statement is divided into two sections: revenues and expenses. The revenues section lists the money that a company has earned from its sales and other activities, and the expenses section lists the money that the company has spent to generate those revenues. The difference between revenues and expenses is the company’s profit (or loss) for the period.
The income statement is an important financial statement because it provides information about a company’s profitability, or its ability to generate profit from its operations, over a specific period of time. It also provides information about a company’s cost structure and operating efficiency. The income statement is used to analyze a company’s financial performance, and to compare it with other companies in the same industry or with its own performance in previous periods.
It’s important to note that the income statement only shows the financial performance of a company over a specific period of time, and it doesn’t show the company’s financial position at a specific point in time like a balance sheet does. Both the balance sheet and income statement, provide a comprehensive view of a company’s financial health and performance over time.