The income statement is one of the main financial statements. It is also known as the statement of earnings, statement of operations, profit and loss statement, or P&L. The income statement reports a company's profitability during the period of time specified in its heading. The time period or time interval might be one year, nine months, three months, one month, 52 weeks, 13 weeks, four weeks, and so on.

The elements or components of the income statement are revenues, gains, expenses, and losses. A single-step income statement format shows revenues and gains minus expenses and losses—and the resulting bottom line: net income.

For the bottom line of the income statement to report a meaningful net income, it should be prepared using the accrual basis of accounting. This means that revenues are reported when they are earned—when the merchandise or services are delivered—and not when the money is collected. Expenses are matched with revenues or are reported when they occur—and not when the expenses are paid.

If a corporation's stock is publicly traded, its net income must also be shown on the face of the income statement as the earnings per share of common stock.

The net income reported on a corporation's income statement will increase the retained earnings reported on the balance sheet. As a result, the income statement is a link between the balance sheet at the beginning of the accounting period and the balance sheet at the end of the accounting period.