Accrual basis income statements are an essential financial report for businesses to provide insights on their profitability. It is based on the accrual accounting method, under which a company records transactions when they occur rather than when payment is made or received. An accrual basis income statement provides information on both revenues and expenses in the period they are incurred and not just those that have been paid or received. This helps paint a clearer picture of a business’s performance and aids with planning future operations. A well-crafted accrual basis income statement gives investors and lenders a more detailed understanding of a business’s overall financial position.