An income statement, also known as a profit and loss statement, is a financial report that summarizes all revenue and expenses for a specific time frame. The income statement can be used to determine a company's profit or loss for the period.
The income statement includes all sources of revenue, such as sales, interest income, and other forms of income. It also consists of all expenses, such as operating expenses, cost of goods sold, and taxes. The net income or loss for the period is determined by subtracting total costs from total revenue.
The income statement can be prepared monthly, quarterly, or yearly. Companies typically use the accrual method of accounting when preparing their income statements. This means that revenue is recognized when it is earned, regardless of when it is received. Expenses are recognized when they are incurred, irrespective of when they are paid.
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