Technical definition
A period-based statement that presents revenue, expenses and the resulting profit or loss.
How it works
The statement explains accrual-based performance over a month, quarter or year. Different formats may distinguish gross profit, operating profit, finance items and tax before arriving at net income.
Everyday example
Revenue 100,000 minus cost of sales 55,000, wages 25,000 and other expenses 12,000 yields net income 8,000.
Common pitfall
Profit is not the period's change in cash because recognition and payment timing differ.