An income statement, otherwise known as a profit and loss statement, basically adds an itemized list of all your revenues and subtracts an itemized list of all your expenses to come up with a profit or loss for a specific 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 the budget or under the budget
Identify specific items that are causing unexpected expenditures.
Determine your income tax liability.
An income statement may be necessary to obtain bank financing