The Income Statement

Income statement is a company's financial statement that indicates how the revenue is transformed into the net income.

The income statement, or profit and loss statement (P&L), reports a company's revenue, expenses, and net income over a period of time.

Noncash items, such as depreciation and amortization, will affect differences between the income statement and cash flow statement.

The primary purpose of the income statement is to assess efficiency as revenues transform into profits/losses.

Income statements have several limitations stemming from estimation difficulties, reporting error, and fraud.

GAAP's assumptions, principles, and constraints can affect income statements through temporary (timing) and permanent differences.