The income statement reports revenues and expenses for a fiscal period as a means of determining how well a company has performed in creating profit for its owners. An income statement reports revenues, expenses, and profit for a fiscal period.
A fiscal period is any time period during which a company wants to report its financial activities. Typical periods are months, quarters (three months), and years. Fiscal months usually correspond with calendar months (January, February, etc.). Fiscal years do not have to correspond with calendar years, however. For example, a company may prepare an income statement for the year ended June 30 that would report operating activities for July 1 through June 30 of the following year. Some companies choose months that end on particular days of the week, such as Sunday. Thus, a company might prepare an income statement for the month ended January 29 if the 29th were the last Sun- day in the month. For example, General Mills’ fiscal year always ends on the last Sunday of May. The statement includes all the revenues and expenses recorded for January.
Net income is the amount of profit earned by a business during a fiscal period. It is a measure of the value created for the owners of a business by the operating activities of the business during a fiscal period. Net income (revenue minus expense) increases owners’ equity as we observed in the transactions. Information in financial statements is summarized from the transactions recorded for a fiscal period.
An income statement provides information about the results of a company’s operating activities for a fiscal period. Owners and other decision-makers can use the statement to evaluate how well a company has performed.