Income Statements
The income statement is one of the three major financial statements that all publicly held firms are required to prepare annually. It provides a record of a company's revenues and expenses for a given period of time, and thus serves as the basic measuring stick of profitability. In fact, the income statement is often referred to as the profit-and-loss statement, with the bottom line literally revealing which result a company achieved. Along with the balance sheet and cash flow statement, the income statement provides important financial information to business managers, investors, lenders, and analysts.
"The income statement is simply a scorecard that summarizes the revenues and expenses of an organization for a specific period of time," Jayson Orr wrote in CMA Management. "It reveals critical information about the operations and profitability of a business unit. It also reveals little secrets that may not be so obvious. In short, the income statement tells how successfully a business unit is fulfilling its prime directive—to generate profit."
Preparing an income statement is one of the basic responsibilities of the accounting function. Accounting is the process of recording and disclosing the financial information for a company so that operating results can be known and comparisons between different years and different companies can be made.
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