An income statement, otherwise known as a profit and loss statement, adds an itemized list of all your revenues and subtracts an itemized list of all your expenses. This determines your profit and loss for the designated period.



An income statement allows you to track revenues and expenses so that you can determine the operating performance of your business, determine what areas of your business are over-budget or under-budget, identify specific items that are causing unexpected expenditures, track dramatic increases in product returns or cost of goods sold as a percentage of sales, and determine your income tax liability.