What is a primary function of an income statement?

The primary function of an income statement is to summarize revenues and expenses over a specific period. This financial statement provides insights into a company's operational performance, indicating whether it has generated a profit or incurred a loss during that period. By presenting the overall revenue earned and the expenses incurred, the income statement allows stakeholders, such as investors, management, and creditors, to evaluate the efficiency and profitability of the company’s operations. This evaluation is crucial for making informed decisions related to investments, management strategies, and financial planning.

In contrast, reporting cash flows pertains to the cash flow statement, which captures the actual cash inflows and outflows. Assessing the financial position at a single point in time is the role of a balance sheet, which provides a snapshot of a company's assets, liabilities, and equity. Showing changes in shareholders' equity is the function of the statement of changes in equity, which illustrates how equity positions have altered over a designated period due to factors like profits retained or dividends paid. Thus, the focus of summarizing revenues and expenses is what distinctly defines the primary purpose of the income statement.