What is an income statement?

An income statement is a key financial report that provides a summary of a company's revenues, expenses, and profits or losses over a specified period. This statement is essential for stakeholders, including management, investors, and creditors, as it reflects the company’s financial performance during that time frame.

The income statement captures various types of income, including sales revenue and other operating income, and deducts expenses, which may include cost of goods sold, operating expenses, and taxes. The result is the net income or loss, which indicates whether a company has generated a profit or incurred a loss. This information is crucial for assessing the profitability and operational efficiency of a business.

Other options do not accurately describe the income statement. For instance, summarizing tax liabilities pertains more to a tax return or other tax-related documents rather than operational performance. A report detailing cash on hand and bank loans would typically fall under a cash flow statement or a balance sheet, while a comprehensive report on employee expenses would focus solely on payroll-related costs, rather than the broader financial performance indicated in an income statement. Thus, the correct identification of the income statement aligns with the comprehensive summary aspect it serves in financial accounting.