Final answer:
The statement in financial accounting that shows a business's earnings and expenses over time is the income statement. It indicates whether the business had an annual budget deficit or surplus by comparing total revenues to total expenses for a fiscal year.
Step-by-step explanation:
In financial accounting, the statement that breaks down how much money a business earned and how much it spent over a period of time is known as the income statement or the profit and loss statement. This statement provides a summary of the company's revenues (which can be compared to taxes) and expenses (similar to spending), leading to the calculation of net income or loss for a specific fiscal period. A fiscal year often begins on October 1 and ends on September 30 of the following year, within which the income statement will report the financial performance.
The income statement begins with the top line known as revenue or sales and subtracts out all expenses until reaching the bottom line, known as net income or profit. This bottom line indicates whether the company experienced an annual budget deficit or surplus, which is the difference between the total revenue collected and total spending. Understanding the income statement is crucial for gauging the financial health of a business.