The income statement shows the business’s income, expenses, gains, and losses. The end product of these transactions is net income or loss. Some also call the income statement a statement of profit and loss, or P&L.
Generally accepted accounting practices (GAAP) also refer to this report as statement of income because the income statement shows not only income and expenses from continuing operations (which basically is revenue minus expenses), but also income from myriad sources, such as the gain or loss that results when a company sells an asset.
Here’s information on each of the four different income statement components:
Revenue: Gross receipts earned by the company selling its goods or services
Expenses: The costs to the company to earn the gross receipts
Gains: Income from non-business-related transactions, such as selling a company asset
Losses: The flip side of gains, such as losing money when selling the company car
It’s important to note that the date for the income statement is for a defined period rather than for the entire life of the company, as with the balance sheet.
