CONTENT :

1. Meaning if Income and Expenditure Account. 
2. Features of Income and Expenditure Account. 
3. Specimen of Income and Expenditure Account. 
4. Distinction between Receipts and Payments Account and Income and Expenditure Account. 

WHAT IS INCOME AND EXPENDITURE ACCOUNT ?

MEANING : 


Income and expenditure account is a summary of revenue income and revenue expenses of a particular period. It is similar to profit and loss account in the sense that it gives the picture of working results of the concern. ' Not for Profit ' concerns prepare  Income and Expenditure Account. It is a Nominal Account. Hence, all expenses / losses of current year are debited and income / gains of current year are credited  to this account. 

INCOMES :

In income and expenditure account only revenue income or gains of the current period are credited. e.g. Subscription received,  Interest on investment received,  Sundry receipts,  General donation received,  Tuition fees etc. 
Items of income of ' Not for Profit ' concern may differ from concern to concern. They depend upon the activity of the concern. Income received for previous year are not taken into this account. However, all incomes pertaining to current year,  whether received or not received or received during the previous year, for this year, are taken into account. In other words, outstanding incomes and Pre-received incomes of current year are considered. 


EXPENDITURES :

In income and expenditure account only revenue expenses / losses of current period are debited.
e.g. Rent paid, Salaries to staff, Honorarium paid, Purchase of stationary etc. 
Items of expenses of ' Not for Profit ' concern may differ from concern to concern. They depend upon the activity of the concern. Expenses paid for previous year or for next year are not taken into account. However, all expenses pertaining to current year. Whether actually paid or not paid or paid during the previous year, for current year,  are taken into account. In other words, outstanding expenses and prepaid expenses during previous year are considered. 
The difference in revenue income and expenditure may be surplus /deficit. Income and expenditure account shows this surplus / deficit of the concern, in the particular period. If their is a surplus, it is added in the 'Capital Fund' and if there is deficit it is deducted from the 'Capital Fund'.
Items of capital receipts are not recorded in income and expenditure account. 
e.g. proceeds of the sale of fixed assets, donations received for specific fund like building fund, prize fund etc. 
Items of capital expenditure are not recorded in income and expenditure account.
e.g. construction of building, purchase of books, furniture etc. 
Items of capital receipts and capital expenditure are shown in balance sheet. 
FEATURES OF INCOME AND EXPENDITURE ACCOUNT :

1. Income and expenditure account is a nominal account. 

2. In income and expenditure account consider only revenue expenses and revenue incomes, pertaining to current year are recorded  

3. Income and expenditure account is similar to profit and loss account, in the sense that, it gives the picture of working results of the concern. 

4. ' Not for Profit ' concerns prepare income and expenditure account instead of profit and loss account. 

5. This account is prepare for finding out surplus / deficit to a concern for a particular period. 

6. Income and expenditure account is a part of final accounts of ' Not for Profit ' concern. Therefore, it is always accompanied with balance sheet. 

7. It has no opening balance. 

8. It's closing balance shows either surplus / deficit, which is transferred to capital fund 

9. It record all cash items and non-cash items, which are related to current period.
e. g. Salaries paid, and also outstanding salary, bad debts written off, depreciation etc. 


The following specimen will help to understand the nature of income and expenditure account and the items covered in income and expenditure account -



DISTINCTION BETWEEN RECEIPTS AND PAYMENT ACCOUNT AND INCOME AND EXPENDITURE ACCOUNT -

No.

Receipts and Payment Account

Income and Expenditure Account

1.

Receipts and Payment Account is a Real Account.

Income and Expenditure Account is a nominal account.

2.

Receipts and Payment Account is a similar to Cash Book, it gives us a summary of cash transaction and bank transaction.

Income and Expenditure Account is a similar to Profit and Loss Account in the sense that it gives us the picture of working results of the concern.

3.

It start with opening cash balance and bank balance.

It has no opening balance.

4.

Its closing balance represents, cash in hand and cash at bank at the end of the given period.

Its closing balance represent either surplus or deficit. Surplus is added in the capital fund. Deficit is deducted from the capital fund.

5.

All receipts and all payments during the current period, are recorded in this account, irrespective of whether they are revenue or capital in nature.

Only revenue receipts and revenue expenses related to current period are recorded in this account.

6.

Non-cash items are not included in this account.

In this account non-cash items like bad debts, depreciation, outstanding expenses etc. are also included.

7.

It includes amounts received or amount paid for any period like previous year, current year, or next year.

In this account amounts related to current year only are included.

8.

Receipts and Payment Account contains, all transactions related to personal account, real account and nominal account.

Income and Expenditure Account  contains only transaction related to nominal account.

9.

This account does not include items regarding outstanding, prepaid pr pre-received.

This account includes items regarding outstanding, prepaid and pre-received.