What is an income statement also known as?

An income statement is commonly referred to as a profit and loss statement because it summarizes the revenues and expenses of a business over a specific period, ultimately showing the net profit or loss for that period. This financial document provides crucial insights into the company's operational performance, illustrating how much money was earned (revenues) and how much was spent (expenses).

The term "profit and loss" highlights the key focus of this statement: to report on profitability. It allows stakeholders, including management, investors, and creditors, to assess the financial health of a business by evaluating its ability to generate profit relative to expenses. The format typically includes sections for total revenues, operating expenses, other income and expenses, and net income, providing a clear picture of financial performance.

In contrast, a financial balance sheet presents a snapshot of a company's assets, liabilities, and equity at a particular point in time, while a cash flow statement records the inflows and outflows of cash, reflecting how well the business manages its cash position. A revenue report may focus solely on the income generated but lacks the comprehensive view of expenses and net profit that the income statement offers. Therefore, the designation of income statement as a profit and loss statement is accurate and reflects its primary function in financial reporting.