Which financial statement summarizes revenues, expenses, and profits or losses over a specific period?

Which financial statement summarizes revenues, expenses, and profits or losses over a specific period?

• A. Balance sheet
• B. Income Statement
• C. Statement of cash flows
• D. Statement of retained earnings

Answer: (B)

This statement shows profitability by summarizing revenues and expenses for a period and reporting net income or loss. It covers items like sales revenue, cost of goods sold, operating expenses, and other income or expenses, with the bottom line representing the period’s net income or net loss. It’s prepared for a defined interval (month, quarter, year), which is why it reflects performance over that span rather than a single moment in time. This distinction is why it best fits the description: it directly measures whether the business earned more than it spent during the period. By contrast, the balance sheet is a snapshot of assets, liabilities, and equity at a specific date; the statement of cash flows traces cash movements; and the statement of retained earnings shows changes in retained earnings over the period.

This statement shows profitability by summarizing revenues and expenses for a period and reporting net income or loss. It covers items like sales revenue, cost of goods sold, operating expenses, and other income or expenses, with the bottom line representing the period’s net income or net loss. It’s prepared for a defined interval (month, quarter, year), which is why it reflects performance over that span rather than a single moment in time. This distinction is why it best fits the description: it directly measures whether the business earned more than it spent during the period. By contrast, the balance sheet is a snapshot of assets, liabilities, and equity at a specific date; the statement of cash flows traces cash movements; and the statement of retained earnings shows changes in retained earnings over the period.