What is the key distinction between an income statement and an operating budget?

The income statement is a historical record that reflects the actual financial performance of a business over a specific period. It summarizes the revenues earned and expenses incurred, leading to the net income or loss during that time frame. This financial document provides insight into how well the business has operated in the past, allowing management and stakeholders to assess its financial health based on historical data.

In contrast, the operating budget is a financial plan that projects expected revenues and expenses for a future period. It helps businesses plan their operations and resource allocation to achieve financial goals. While both documents are essential for financial management, the income statement serves as a record of actual performance, whereas the operating budget is about anticipation and planning for future activities.