Definition

Income Statement

Income statement refers to a financial statement that presents the revenues and expenses and resulting net income or net loss of a company for a specific period of time; prepared on a monthly, quarterly, or annual basis. It records all the revenues and expenses for the given period and shows whether the firm is making a profit or is experiencing a loss (which is why the income statement if often referred to as the “profit-and loss statement). Most income statements are prepared in a multiyear format, making it easy to spot trends.

The three numbers that receive the most attention when evaluating an income statement are the following:

  • Net sales: Net sales consist of total sales minus allowances for returned goods and discounts.
  • Cost of sales: Cost of sales includes all the direct costs associated with producing or delivering a product or service, including the material costs and direct labor. In the case of New Venture Fitness Drinks, this would include the ingredients that go into the fitness drinks and the labor needed to produce them.
  • Operating expenses: Operating expenses include marketing, administrative costs, and other expenses not directly related to producing a product or service.

Income statement is the financial record of a company’s revenues, expenses, and profits over a period of time.


Income statement is an accounting statement that summarizes a company’s revenues, cost of goods sold (if it sells merchandise), expenses, and net profit or loss over a period of time.


Income statement is a financial statement showing a firm’s revenues, expenses, and net income for some period of time; indicates profitability, the ability to generate income. Also called earnings statement or statement of profit and loss.

Share it:  Cite

More from this Section

  • Geographic expansion
    Geographic expansion is an internal growth strategy in which an entrepreneurial business ...
  • Depreciation
    Depreciation is the process of allocating to expense the cost of a plant asset over its ...
  • Preparation
    Preparation is the background, experience, and knowledge that an entrepreneur brings to ...
  • Liquid market
    Liquid/ Stock market is a market in which stock can be bought and sold fairly easily through ...
  • Outstanding assets
    Outstanding assets are those assets over which the company has no immediate claim but ...