Chapter 5, Problem 1GI

In general, how does the income statement help satisfy the objectives of financial reporting?

To determine

Explain the manner in which the income statement helps in satisfying the objectives of the financial reporting.

Explanation of Solution

Income statement: The financial statement which reports revenues and expenses from business operations and the result of those operations as net income or net loss for a particular time period is referred to as income statement.

In general, the income statement helps to satisfy the objectives of the financial reporting by:

• Providing the significant information about the financial performance of the company to the investors, lenders, and other stakeholders.
• Providing information about the net income of the company.
• Evaluating the financial performance by assessing the amounts, timing, and uncertainty of future net cash inflows.