An income statement is a formal financial document used to demonstrate the profits and losses of an individual or business account. Income statements are important documents, as they demonstrate whether or not someone is profitable. This can influence decisions related to financial lending, investing, and more. If someone is more money than they are earning, investors and lenders will be able to assess their risk using this document.
An income statement is also known as a profit or loss statement because it will clearly outline the financial income and debts for a certain period of time. This period of time could be a month, a fiscal year, or any other time period. Only the financial losses and profits for this time period will be included on the income statement. Cash income or distributions will not be included on this financial document.
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