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What is an income statement

The income statement provides a comprehensive snapshot of a company's revenues and expenses during a specified fiscal period, enabling stakeholders to assess its profitability and overall financial performance.

The income statement provides a comprehensive snapshot of a company’s revenues and expenses during a specified fiscal period, enabling stakeholders to assess its profitability and overall financial performance.

Breaking down the basics

The primary purpose of an income statement is to ascertain whether a company has generated a profit or incurred a loss within a given fiscal year. Achieving this insight involves the meticulous examination of all operating revenues and operating expenses for the said period. By subtracting total expenses from revenues, one arrives at the annual result before tax—a crucial indicator of a company’s operational success.

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Understanding the bottom line

The primary purpose of an income statement is to ascertain whether a company has generated a profit or incurred a loss within a given fiscal year. Achieving this insight involves the meticulous examination of all operating revenues and operating expenses for the said period. By subtracting total expenses from revenues, one arrives at the annual result before tax—a crucial indicator of a company’s operational success.

The annual report

The income statement serves as a fundamental component of a company’s annual report, offering stakeholders a comprehensive view of its financial performance. Alongside the income statement, the annual report typically includes the balance sheet, notes, and cash flow statement. Notably, smaller companies may be exempt from the cash flow statement requirement, emphasizing the flexibility and scalability of financial reporting standards.