— Kishore V, SME and ACW at Edumarz
Income and Expenditure Account:
- It’s a summary of the accounting year’s profits and expenses. In the case of businesses, it’s similar to a profit and loss statement generated on an accrual basis.
- It solely covers income items, and the balance at the end indicates whether there is a surplus or deficit.
- The Income and Expenditure Account serves the same purpose as a corporate organization’s profit and loss account.
- This account contains all revenue items for the current period, as well as costs and losses on the expenditure side and earnings and profits on the income side.
- It displays the net operational result in the form of a surplus (i.e., more revenue than expenditure) or a deficit (i.e., more spending than income), which is then moved to the capital fund on the balance sheet.
- The Receipts and Payments Account is used to prepare the Income and Expenditure Account on an accrual basis, together with supplementary information such as outstanding and deferred costs, depreciation, and so on. As a result, several entries in the Receipts and Payments must be modified.
- For example, the subscription amount of Rs.2, 65,000 collected throughout the year 2014-15 on the receipts side of the Receipt and Payment Account includes receipts for periods other than the present period. However, in the Income and Expenditure Account for 2014-15, the subscription sum of Rs. 2,25,000 would be represented as income only for the current year.