Final answer:
The statement that reports revenues, expenses, and profits over a time period such as quarterly or annually is the income statement. It details how revenue is generated and how expenses are incurred, leading to a net income figure indicating profit or loss. The income statement is essential for assessing a company's profitability and financial health over time.
Step-by-step explanation:
The statement that reports revenues, expenses, and profits for a specified period of time, such as quarterly or annually, is known as the income statement. An income statement is a critical financial document used by businesses to track the financial performance over a specific period. It itemizes the ways in which revenue is generated and expenses are incurred, resulting in a net income figure, which can either be a profit or a loss.
Revenue refers to the income received from normal business operations and is often broken down into operating revenue and non-operating revenue. Expenses include all costs incurred by the business during the same period. The difference between revenue and expenses shows the net income or net loss of the business. A positive net income indicates a profit, while a negative figure indicates a loss.
Unlike a balance sheet, which provides a snapshot of a company’s financial condition at a particular moment in time by showing assets, liabilities, and equity, the income statement demonstrates how well a company is performing over time. The cash flow statement is another financial document, which focuses on the movement of cash in and out of a business, demonstrating its operational, investing, and financing activities.
Understanding an income statement is important for stakeholders such as investors, creditors, and government agencies to assess a company's profitability, financial health, and prospects for future growth. Alongside the balance sheet and cash flow statement, it is one of the three key financial statements used in business finance and accounting.