Question: What is meant by the terms elements and items as they relate to the income statement? Why might items have to be disclosed in the income statement?

An income statement refers to a report that contains the description of a business entity’s revenues and expenses associated with one accounting period.

The following major categories are reported in the income statement:

• Revenues:Revenues are the gross receipts generated by a business concern through itsoperational activities.

• Losses:Losses denote theexcess of expenses incurred by a business than revenue generation.

• Gains:Gains refer to the revenues generated from unusual ornon-operational activities of the company.

Expenses: Expenses are the cost incurred by a business entity to generate revenues.

An income statement contains the elements mentioned above to determine the net loss or net income generated by a business from itsoperating and non-operating activities.

It also facilitates the stakeholders in predicting the company's future and forecasting future profits.