The purpose of an income statement is to:

• A. Report a company’s assets, liabilities, and stockholders’ equity at a specific date
• B. Report a company’s revenues and expenses for a period and the resulting net income or net loss
• C. Report changes in a company’s stockholders’ equity accounts for a period, including issuances and dividends
• D. Report a company’s cash inflows and cash outflows for a period, classified by operating, investing, and financing activities

Answer: (B)

Verified step by step guidance

1. Understand that the income statement is one of the primary financial statements used in accounting, alongside the balance sheet, statement of stockholders' equity, and statement of cash flows.
2. Recognize that the income statement focuses on a company's financial performance over a specific period, such as a month, quarter, or year, rather than at a single point in time.
3. Identify that the income statement reports revenues earned and expenses incurred during the period, which helps determine the company's profitability.
4. Know that the difference between total revenues and total expenses on the income statement results in either net income (profit) or net loss for the period.
5. Distinguish the income statement from other financial statements by noting that it does not report assets, liabilities, stockholders' equity balances, or cash flows, but rather the operational results reflected in revenues and expenses.