What does an income statement report?

An income statement provides a summary of a company’s financial performance over a specific period, typically detailing how much money is made and spent. The primary elements reported on the income statement are revenues and expenses.

Revenues represent the total income generated from operations or the sale of goods and services before any costs or expenses are deducted. Expenses, on the other hand, reflect the costs incurred in generating those revenues. By subtracting total expenses from total revenues, the income statement allows stakeholders to see the net income or profit for that period.

The focus on a specific time frame is crucial because it helps in evaluating the overall performance of a business and understanding whether it is operating at a profit or a loss during that time. This information is vital for decision-making by management and investors, as it provides insights into the efficiency and profitability of the company’s core operations.

The other options, while related to financial reporting, do not accurately describe what an income statement reflects. Assets and liabilities relate to the balance sheet, cash flows pertain to the statement of cash flows, and changes in shareholder equity are found on the statement of changes in equity.