What is the main purpose of an income statement?

The main purpose of an income statement is to summarize revenues and expenses over a specific period. This financial statement provides insights into a company's profitability by detailing how much money was made (revenues) and how much was spent (expenses) during that timeframe. By analyzing the income statement, stakeholders can assess the overall financial performance of the business, understand trends in income and expenditures, and determine the company's net income or loss.

An income statement is typically structured to reveal not just the total revenues and expenses but also different categories of income and costs, such as operating expenses, interest, and taxes. This allows for a nuanced view of the financial operations. Users can analyze this information to make informed decisions regarding investments, management strategies, and financial planning. Thus, the summarization of revenues and expenses over a specific period is fundamental to understanding the company's operational effectiveness and viability.