What is the purpose of the income statement?

• A. Report Income minus expenses for a specific period of time.
• B. Display assets.
• C. Show cash balances.
• D. Provide notes.

Answer: (A)

The income statement shows profitability over a period by subtracting expenses from revenues. It reports how much money the company earned and what it spent during a specific time frame (like a month, quarter, or year), resulting in net income or loss for that period. This focuses on performance over time, not the company’s position at a single date or its cash flows. Assets are shown on the balance sheet, not here; cash balances appear on the balance sheet or the cash flow statement; notes are part of the notes to the financial statements. So the main purpose is to reflect income minus expenses over a period to indicate profitability.