An income statement measures performance over a period. Start with earned revenue, subtract cost of goods sold to find gross profit, then subtract operating expenses. Other income and expenses complete net income. Select a beginning and ending date; a balance sheet date alone does not define the period.
Exclude owner contributions and draws because they change equity without measuring profit. Exclude customer advances until the promised service is delivered. Expenses can exceed revenue, producing a net loss. A bank balance is not profit: credit sales, unpaid bills and noncash depreciation all separate accrual performance from cash movement. Read the statement line names before deciding whether a number belongs in operating income or net income.