What does an income statement show over a period of time?

An income statement provides a detailed overview of a company’s financial performance over a specific period, typically reflecting the revenue generated and the expenses incurred during that time frame. The primary objective of an income statement is to calculate the net profit or loss, which is the difference between total revenues and total expenses. This information is crucial for investors, management, and stakeholders as it indicates how well the company is performing in generating profit from its operations.

While the concept of assets and liabilities pertains to the balance sheet, revenue and expenses are integral components of the income statement, ultimately contributing to the calculation of profit or loss. Cash flow reflects the actual liquidity of the company and is addressed in the cash flow statement rather than the income statement. Therefore, stating that the income statement shows profit or loss encapsulates its main purpose and function within financial reporting.