Financial statements
Income statement
An income statement reports revenue, expenses, and profit or loss over a period.
Reviewed by the Booksmrt bookkeeping teamLast reviewed 2026-07-27
How it works in the books
Also called a profit and loss statement, it shows operating performance for a month, quarter, or year. It does not show every movement in cash or the full financial position.
Example
A June income statement may show $40,000 of revenue, $25,000 of expenses, and $15,000 of net profit.
What can go wrong
A profitable income statement does not guarantee that customers paid or that loan principal and owner draws were small.
Compare Income statement
Income statement vs. cash flow statementUse the income statement to understand reported performance and the cash flow statement to understand why cash changed. Profit and cash differ because not every revenue or expense moves cash in the same period, and not every cash movement affects profit.Balance sheet vs. income statementThe balance sheet answers what the business owns, owes, and has accumulated at one date. The income statement answers how much the business earned or lost over a span of time. The statements are connected through equity and net income.
Sources
Educational information only. Booksmrt provides bookkeeping services, not tax, legal, audit, or investment advice. Confirm material accounting and tax decisions with the appropriate professional.