What financial document summarizes the income and expenses of a business?

The income statement is the financial document that summarizes the income and expenses of a business over a specific period, typically a month, quarter, or year. It provides a clear view of the company’s profitability by detailing revenue earned from sales and subtracting the costs and expenses incurred during that same period. This summary allows stakeholders, including management, investors, and creditors, to assess the company’s financial performance and make informed decisions.

In contrast, the balance sheet details the company’s assets, liabilities, and equity at a specific point in time, providing a snapshot of the business’s financial position but not its operational performance over time. The cash flow statement tracks the flow of cash in and out of the business, highlighting how cash is generated and used, rather than directly summarizing income and expenses. Lastly, a tax return is a formal declaration of income that a business must file with tax authorities, which may summarize income and expenses but is primarily focused on tax obligations rather than providing a comprehensive performance view. Each of these documents serves a different purpose, but for summarizing income and expenses specifically, the income statement is the correct choice.