Income Statement Definition:

Income statement is the summary of a management’s performance as reflected in the profitability (or lack of it) of a firm over a certain period. It itemizes the revenues and expenses of past that led to the current profit or loss, and indicates what may be done to improve the results. In contrast to a balance sheet (which is a ‘still photograph’ taken at a certain time) an income statement is a ‘movie’ that depicts what happened over a month, quarter, or year. It is based on a fundamental accounting equation (Income = Revenue – Expenses) and shows the rate at which the owners equity is changing for better or worse. Along with balance sheet and cash flow statement it forms the basic set of financial information required to manage a firm. Also called earnings report, operating statement, or profit and loss account.