income statement Definition

the income statement is a summary of all of a company's transactions during a period of time that involves income, expenses,gains or losses.
the income statement is prepared using the concept of accruals accounting. this means that income can be recognized before the actual receipt of cash, and expenses can be recognized before the actual expenditure of cash. item on the income statement will be recorded as they occur,not when cash is transacted.
the income statement gives the results of operations for a period of time. when people talk about net income, they usually mean the period of time of one year, but income statements are also prepared on a quarterly or monthly basis as well as annually.
the accounts that are used to record revenues,expenses,gains and losses throughout the year are temporary accounts. this means that means that they are closed to a permanent account (retained earnings)at the end of each period. After they are closed, temporary accounts have a zero balance and therefore are not shown individually on the balance sheet. the retained earnings account, which is presented on the balance sheet as part of owner's equity , represents the profit of the company.