top of page

Definition

Income Statement


The income statement, also known as the profit and loss statement (P&L), is one of the core financial statements used to assess a company’s performance over a specific period—typically monthly, quarterly, or annually. It shows a business’s revenues, expenses, and ultimately, its net profit or loss.


The structure of an income statement usually follows this format:

  1. Revenue (Sales): Total income from goods or services sold.

  2. Cost of Goods Sold (COGS): Direct costs of producing or purchasing those goods.

  3. Gross Profit: Revenue minus COGS.

  4. Operating Expenses: Costs related to running the business, such as salaries, rent, and marketing.

  5. Operating Income: Gross profit minus operating expenses.

  6. Other Income and Expenses: Includes interest, gains, or losses.

  7. Net Income: The final profit or loss after all revenues and expenses are accounted for.

The income statement helps stakeholders evaluate profitability, efficiency, and financial health. It’s essential for decision-making, budgeting, and tracking business growth over time.


Unlike the balance sheet, which shows a company’s position at a single point in time, the income statement reflects performance over a period. In short, it tells the story of how much a business earned and spent—and what was left over.

See also

bottom of page