The income statement, also referred to as the profit and loss statement, is one of three major financial statements, providing a summary of a company's revenues, expenses, and resultant profit or loss over a specified period. It serves as a tool for stakeholders, including investors, creditors, and management, offering insight into the company's financial performance and overall health.

Commencing with total revenues, which encompass sales income along with supplementary sources such as interest or dividends, the income statement deducts the cost of goods sold and operational expenses. This calculation yields the operating income, representing profits generated from core activities before considering interest and taxes. Non-operational items, such as interest income or losses from asset sales, are then accounted for.

The net income or profit is derived by subtracting all expenses, inclusive of taxes and non-operational items. This final figure serves as a pivotal metric of the company's profitability and financial strength, enabling stakeholders to assess its performance and overall stability. The income statement shows the financial wellbeing of a company, including its capacity to generate revenue, manage expenses, and produce profits. It helps business owners make informed decisions.