Definition of Income Statement
The income statement is an often-cited financial statement since it reports a company's net income (earnings) for the most recent year, quarter, 13 weeks, etc. The period of the time covered by the income statement is shown in its heading. The income statement is also known as the statement of operations, results of operations, statement of earnings, profit and loss statement, and P&L.
Examples of Income Statement Elements
The main elements reported within the income statement are:
- Revenues, which are the amounts earned through the sale of goods and/or the providing of services
- Expenses, which include the cost of goods sold, SG&A expenses, and interest expense
- Gains and losses, such as the sale of a noncurrent asset for an amount that is different from its book value
The income statement best measures a company's net income during a specific period of time when it is prepared by using the accrual basis of accounting. Under the accrual method the revenues are the amounts that were earned (not the amount of cash received), and the expenses are the amounts that best match the revenues or were used up during the period (not the cash that was paid out).
The income statement's bottom line net income or earnings must be reported as a per share amount when the corporation's common stock is publicly traded.