An income statement is a summary of a company’s profit and loss over a specific time period. It is also known as a Profit & Loss statement, or P&L.
It shows the income earned and expenses paid by a business over the period being reported. It shows how well the business is doing by indicating what kind of sales were made, how many returns there were, what it costs to run the business, whether there were unexpected expenses, and what your income tax liability will be.
The simple income statement formula is Revenue-Cost of Goods Sold=Gross Margin (Gross Profit)-Operating Expenses=Net Income.
The P&L statement includes both variable (COGS) and fixed (operating expenses) costs. Net income is also known as the bottom line.
Most income statements calculate Earnings Per Share (EPS), which calculates how much each stockholder receives for each share they own if the company distributed the net income.