Which financial document summarizes revenues and expenses to show net income for a period?

Which financial document summarizes revenues and expenses to show net income for a period?

• A. Balance Sheet
• B. Income Statement
• C. Cash Flow Statement
• D. Statement of Changes in Equity

Answer: (B)

This is about showing how profitable the business was over a period by pulling together revenues and expenses. The document that does this—summing all income and all costs across a defined time (like a month, quarter, or year) to show net income—is the income statement, also known as the profit and loss statement. It starts with revenues, subtracts costs of goods or services sold, then subtracts operating expenses, taxes, and other items to arrive at net income. This figure tells you whether the business earned a profit during that period. In contrast, the balance sheet is a snapshot of financial position at a single point in time (assets, liabilities, and equity); the cash flow statement tracks actual cash inflows and outflows; and the statement of changes in equity shows how owner’s equity changed over the period. For a landscaping contractor, the income statement is the key tool for understanding profitability from the work performed, reflecting how pricing, labor, materials, and overhead affect net income. Net income = revenues minus expenses; a positive result means the period was profitable.

This is about showing how profitable the business was over a period by pulling together revenues and expenses. The document that does this—summing all income and all costs across a defined time (like a month, quarter, or year) to show net income—is the income statement, also known as the profit and loss statement. It starts with revenues, subtracts costs of goods or services sold, then subtracts operating expenses, taxes, and other items to arrive at net income. This figure tells you whether the business earned a profit during that period.

In contrast, the balance sheet is a snapshot of financial position at a single point in time (assets, liabilities, and equity); the cash flow statement tracks actual cash inflows and outflows; and the statement of changes in equity shows how owner’s equity changed over the period. For a landscaping contractor, the income statement is the key tool for understanding profitability from the work performed, reflecting how pricing, labor, materials, and overhead affect net income. Net income = revenues minus expenses; a positive result means the period was profitable.