Recall that the purpose of Financial Accounting is to provide useful information to investors and creditors about a company. The root of that information is the financial statements.
The financial statements are prepared directly from the adjusted trial balance.
Financial statements are prepared in a specific order with the income statement being first. This is because some information from one statement is needed to complete others. Recall that an income statement includes a company's revenues and expense accounts and the net of those two is net income.
So let's use the adjusted trial balance to complete our Income Statement.
We take revenues and expenses from the trial balance and put those on the income statement.
The income statement has the company name, the name of the financial statement, which is the income statement, and the period covered.
Income statements can be prepared for a year-ended, month-ended or quarter-ended. The statement needs to reflect the time period.
So income statements detail revenues and expenses of a business for a periord or range of time and that's why the date is so important. Our investors and creditors need to know the period of time the statement covers.
Revenues are listed first. If we have more than one type of revenue we would likely subtotal them and list the total revenue in the far column.
Expenses are listed next. Since companies have many types of expenses we would subtotal them and list the total expenses in the far column.
The difference between the two (revenues and expenses) is net income or net loss.