The income statement, often called a statement of operations or a profit and loss statement (P&L), describes the performance of the company over a period of time, usually a month, a quarter, or a year. This information measures the company’s achievement (revenue) and the resources (expenses) that were expended in order to produce that achievement. The income statement is summarized as follows:
Revenue − Expenses = Profit
The difference between revenues achieved and expenses incurred is called profit or net income.
The following paragraphs describe the details of the income statement. As a reference, we have provided a five-year history of the Metropolitan Manufacturing Company in Exhibit 2-1. This is part of the ...