INCOME AND EXPENDITURE ACCOUNT
Income and Expenditure Account is an account prepared by the non- profit organisations to find out the surplus of deficit of the non-trading concern. This account records all the income and expenditure of the non- trading concerns for an accounting year. Income and Expenditure is just like profit and loss account of profit organisations. This accounts records all the expenditures on the Debit side and all the incomes on the Credit side. The resulting surplus or deficit is added to and subtracted from the Capital fund in the balance sheet respectively.
FEATURES OF INCOME AND EXPENDITURE ACCOUNT
NATURE OF ACCOUNT: It is a Nominal Account. It follows the rule of:
‘DEBIT ALL EXPENSES AND LOSSES
CREDIT ALL INCOMES AND GAINS’
BASIS OF RECORDING: This account is prepared on the basis of Accrual System. Therefore,
- Revenue expenses for the accounting year are recorded, whether they have been paid or not.
- Revenue incomes for the accounting year are recorded, whether they have been received or not.
- Non-cash expenses like depreciation are recorded.
PERIOD: It is prepared at the end of an accounting year and record all the items of incomes and expenses that belongs to the current year only.
NATURE OF ITEMS TO BE RECORDED: This account records only Revenue items. All items of capital nature are ignored while preparing this Account.
Example: The amount received from sale of machinery is not recorded but the amount of profit or loss on the sale of machinery will be recorded.
OMISSION OF OPENING AND CLOSING CASH BALANCE: There is no opening or closing cash and bank balance in the Income and Expenditure Account.
PURPOSE: It is prepared to know about the surplus or deficit of the non trading concern for a particular accounting year. The excess of income over expenditure is known as surplus and the excess of expenditure over income is known as deficit.:
ADJUSTMENTS: All the adjustments regarding outstanding expenses, prepaid expenses, accrued income, income received in advance are posted to this account as this account is prepared on the Accrual basis of Accounting.:
FORMAT OF INCOME AND EXPENDITURE ACCOUNT
Income and Expenditure Account for the year ending…….
DR. CR.
| EXPENDITURE | ₹ | INCOME | ₹ |
| To Salaries Add: Outstanding at the end Less: Outstanding at the beginning To Rent To Insurance Premium Less: Prepaid To Audit fees To Printing and Stationery To Honorarium To Telephone expenses To Repairs To Depreciation To Sports material used To Surplus (Excess of income over expenditure) | By subscriptions Add: Outstanding at the end Add: Advance at beginning Less: Outstanding in beginning Less: Advance at end By Entrance fees By Donations By Sale of old newspapers By Hall Rent By Sundry Receipts By Deficit (Excess of Expenditure over Income) | ||