What does an income statement display?

The income statement is a key financial report that provides a summary of a company's revenues and expenses over a specific period of time, typically a quarter or a year. This financial statement highlights how much money the company earned (revenues) from its operations and how much it spent (expenses) during that same period. The difference between total revenues and total expenses results in the net income or net loss for the period, which is crucial for assessing the company's profitability.

By focusing on revenues and expenses, the income statement allows stakeholders to evaluate the company’s financial performance and operational efficiency. It serves as a vital tool for management, investors, and analysts to make informed decisions about the company's overall financial health and future outlook. Other choices, such as summaries of assets and liabilities or detailed employee salaries, do not capture the essence of an income statement's purpose. Likewise, a list of all financial transactions would fall under different accounting reports, such as the general ledger or cash flow statement.