A more thorough explanation:

The income statement is a financial report that shows how much money a business made and spent during a certain period of time. It is also known as the statement of income, statement of earnings, statement of operations, or statement of comprehensive income.

The income statement has three main elements:

• Revenues: This is the money a business earned by selling goods or services to its customers. It includes all the money the business expects to receive, whether or not the customer has paid yet. For example, if a bakery sells $1,000 worth of bread in a month, that $1,000 is considered revenue.
• Expenses: This is the money a business spent to earn its revenues. It includes all the costs of running the business, such as rent, salaries, and supplies. For example, if the bakery spent $500 on flour, $200 on wages, and $300 on rent in a month, those expenses would be subtracted from the revenue to calculate the net income.
• Net Income: This is the amount of money a business has left over after subtracting its expenses from its revenues. If the revenues are higher than the expenses, the net income is positive. If the expenses are higher than the revenues, the net income is negative. For example, if the bakery's revenue was $1,000 and its expenses were $1,000, the net income would be $0.

The relationship between revenues, expenses, and net income can be expressed in an equation:

Revenue - Expenses = Net Income

This equation shows that the net income is the difference between the revenues and the expenses. If the revenues are higher than the expenses, the net income is positive. If the expenses are higher than the revenues, the net income is negative.

Let's say a clothing store had the following financial information for the month of January:

• Revenues: $10,000
• Expenses: $7,000

To calculate the net income, we would use the income statement equation:

$10,000 - $7,000 = $3,000

This means that the clothing store had a net income of $3,000 for the month of January. This is the amount of money the store earned after subtracting all its expenses.