1. What is an income statement and what information does it communicate?
Solution
Answer: Income statement:The income statement is one of the three primary financial
statements used to assess a company’s performance and financial position (the two others
being the balance sheet and the cash flow statement). The income statement summarizes the
revenues and expenses generated by the company over the entire reporting period.
Net income=Revenue-Expenses
It communicates about:
Revenue is the money that a company takes in.
Expenses are the money that a company pays out.
Net income is the amount of money that is left after a company subtracts their expenses from
their revenue.