Is a financial statement that measures a company’s financial performance over a specific accounting period. Financial performance is assessed by giving a summary of how the business incurs its revenues and expenses through both operating and non-operating activities. It also shows the net profit or loss incurred over a specific accounting period, typically over a fiscal quarter or year.

Also known as the “profit and loss statement” or “statement of revenue and expense.”

Explanation of Income Statement

An income statement is one of three major financial statements. The other two are the balance sheet and the statement of cash flows. The income statement is divided into two parts: the operating and non-operating sections.

The portion of the income statement that deals with operating items is vital to investors and analysts alike because this section discloses information about revenues and expenses which are direct results of the regular business operations. For example, if a business manufactures equipment, then the operating items section would document (itemize) the revenues and expenses involved in the production of those equipment.

The non-operating items section discloses revenue and expense information about activities that are not tied directly to a company’s regular operations. For example, if the equipment company sold a factory including old plant equipment, then this information would be in the non-operating items section.