What is the purpose of the Income Statement?

The purpose of the Income Statement is to summarize the company's revenues and expenses over a specific period, typically a fiscal quarter or year. This statement provides a clear view of the company's financial performance, showing how much money the company earned from sales and other sources, and how much it spent on operating expenses, taxes, and other costs during the reporting period.

By comparing total revenues to total expenses, users can determine the net income or loss, which is a critical indicator of profitability. This information is invaluable for stakeholders, including investors, management, and analysts, as it helps assess the company's operational efficiency and the effectiveness of its business strategies.

While cash position, shareholders' equity changes, and a snapshot of assets and liabilities are important aspects of financial reporting, they are not the primary focus of the Income Statement. Instead, those elements are typically covered in the Cash Flow Statement and the Balance Sheet.