What does the income statement primarily report?

The income statement primarily reports the company's revenues and expenses, providing a clear view of its financial performance over a specific period. This statement is crucial for understanding how much money a company is earning from its operations and how much it is spending to generate those earnings.

By detailing revenues, the income statement shows the total amount generated from sales of goods or services. The expenses section indicates all costs incurred, ranging from operating expenses to interest and taxes. The difference between revenues and expenses reveals the net income or loss for that period, which is vital for stakeholders, including management, investors, and creditors, to assess the company's profitability.

Assets and liabilities, which are reported on the balance sheet, reflect the company's financial position at a specific point in time, rather than its performance over time. Owner's equity, which shows the net worth of the company, is also not the focus of the income statement. Finally, while cash flow from operations is important for assessing liquidity and cash management, it is reported on the cash flow statement, not the income statement. Thus, the income statement's primary function is to highlight revenues and expenses.