The Essence of Income Statement

An income statement, also known as a profit and loss account, revenue statement and so forth, is a periodic financial summary which shows the profit or loss sustained by a company in a particular period. It also includes all the incomes and expenditures involved in the business. It is an important financial tool used to measure the progress of a given business.

Reasons for Income statement

  • The income statement is essential in showing investors the state of the business. Investors go through the income statement before deciding whether to invest in a company or not.
  • Income statement generally helps to highlight the direction a given business is heading to at a given point in time and also will help the managers or people involved in the business to control and track loss in the business.

In general, every business ought to have a well prepared income statement at the end of each particular period of time to know its state.

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