What is the primary purpose of the income statement?

The primary purpose of the income statement is to report financial performance over a specific period. This financial statement provides an overview of a company's revenues, expenses, and profits or losses during that time frame, typically covering a quarter or a year. By summarizing the income and expenses, the income statement allows stakeholders—such as investors, management, and creditors—to assess how well the company is generating profit from its operations. It highlights the business's ability to turn sales into net income, which is crucial for evaluating operational efficiency and profitability.

The other options, while relating to financial reporting, do not capture the main function of the income statement. Summarizing cash balances pertains to the cash flow statement, while tracking assets and liabilities relates to the balance sheet. Listing historical transactions is more geared toward bookkeeping practices rather than summarizing performance as seen in the income statement. Thus, reporting financial performance is the core role of this vital financial document.