In accounting an Income Statement reflects whether or not a business is profitable. It is a summary of the business revenues and expenses and shows whether the business had a net profit or net loss for the specific period of time being reported. It's important to note that when total revenues are more than total expenses, the business experienced a net profit. When revenues are less than expenses (or expenses are more than revenues), the business experienced a net loss for the period. The only two accounts reported on an Income Statement are revenues and expenses.

Revenues are always listed first on the Income Statement, and if multiple accounts are reported, they will be subtotaled. When expenses are listed, always start with the largest account (the highest balance) and work your way down. Expenses will then be subtotaled. Net Income is calculated by subtracting total expenses from total revenues; Total Revenues - Total Expenses.

Below is an example of what an Income Statement will look like:

Shoe Burger Corp.
Income Statement
    Service Revenue $9,000
    Rent Expense $3,000
    Salaries Expense                     $1,000
        Total Expense $4,000
    Net Income $5,000


An income statement provides significant numbers that help with analysis of how a company is performing. In particular, Net Income is used to calculate Earnings per Share, Profit Margin, and the Times Interest Earned.