The Income Statement is the most basic way a company keeps score. The Income Statement, sometimes called a Profit & Loss statement or P & L, lists business revenues/sales, subtracts expenses, and shows whether the company made a profit or suffered a loss. The main value of an Income Statement, aside from its obvious value of serving as a financial scorecard, is its ability to show a detailed flow of revenues, costs, and expenses over a short- or long-term period.
Think of it this way: The Balance Sheet, which shows assets and liabilities, states the financial position of a company while the Income Statement, which shows revenues and expenses, indicates operational results. The Balance Sheet, in short, shows where you are — the Income Statement can not only show where you are but also how you got there.
The typical Income Statement is broken down into two parts: Sales and Expenses. Here's an example of a very simple Income Statement: