The income statement is one of the major financial statements used by accountants and business owners. The income statement is sometimes referred to as the profit and loss statement (P&L), statement of operations, or statement of income.

The income statement is a company's financial statement that indicates how the revenue is transformed into the net income. It displays the revenues recognized for a specific period, and the cost and expenses charged against these revenues. The purpose of the income statement is to show management and investors whether the company made or lost money during the period being reported. The income statement is important because it shows the profitability of a company during the time interval specified in its heading. The period of time that the statement covers is chosen by the business and will vary.

People pay attention to the profitability of a company for many reasons. For example, if a company was not able to operate profitably or reported a net loss, management has to understand why this occurred. Repetition of net losses increases the risk that the company may be in default. A banker/lender/creditor may also be hesitant to extend additional credit to the company. A company's ability to operate profitably or reported net profit, is important to current lenders and investors, potential lenders and investors, company management, competitors, and others.