In accounting terminology, the term Income Statement refers to an accounting of the performance of a company over a set period of time. The Income Statement itemizes expenses and revenue which have resulted in the net profit or loss incurred by the company over that time period.
For example, unlike the balance sheet, which illustrates the financial condition of the company, the Income Statement shows the net profit or loss the company has had over a period of time, typically on a monthly, quarterly or yearly basis. The basic formula for the Income Statement consists of Income = Revenue – Expenses. The Income Statement also lists gains and losses from related activity, such as the sale of company assets and the retiring of debts. The Income Statement is also known as the profit and loss account and the earnings report, and along with the cash flow statement and the balance sheet, makes up the most crucial documents of a corporation.