Income Statement Explained

An income statement reports a company’s revenue, expenses and earnings during a specific accounting period—typically a month, quarter or year. It shows the revenue and profit generated from operations as well as other gains and losses so that internal business leaders understand potential problems and areas for improvement. Additionally, income statements are critical in sharing financial information to people outside the business. Investors and other external stakeholders use the income statements to understand how profitably leaders run a business and the likelihood of future success, while banks may use an income statement as financial evidence for approving a loan to the business. Income statements may also be known as statements of earnings, statements of income, net income statements, profit and loss statements or simply “P&Ls.”

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