If the balance sheet is a photograph, the income statement is a film: it traces activity over a period, usually one year. It answers a simple question: did the company make or lose money?

How it works

The logic is one giant subtraction: start with income (what the company earned) and take away expenses (what it spent).

• Income: sales, services, financial income.
• Expenses: purchases, wages, rent, taxes, interest.
• Profit or loss: income − expenses. Positive means a profit; negative means a loss.

You read it in layers: operating profit (the core business), then financial, then exceptional items. That shows where the result actually comes from.

Key takeaway: the income statement measures performance over a period. Profit or loss, it tells you whether the activity creates value.