Characteristics of income statement

The three main characteristics of an income statement are: Period. An income statement should only include transactions that occurred within a certain period of time (e.g. Quarter-to-date, Month-to-date, Year-to-Date)

Revenues, Expenses, and Profit

Each of the three main elements of the income statement is described below.

The income statement is important because it clearly states whether a company is making a profit. The total revenues and expenses of a company are listed on its income statement. Subtracting the expenses from revenues provides the total profit during the given accounting period, usually a year or a quarter of a year.

Elements of the Income Statement

The income statement consists of revenues (money received from the sale of products and services, before expenses are taken out, also known as the “top line”) and expenses, along with the resulting net income or loss over a period of time due to earning activities.

The income statement focuses on four key items—revenue, expenses, gains, and losses.

There are two different types of income statement that a company can prepare such as the single-step income statement and the multi-step income statement.