— Kishore V, SME and ACW at Edumarz.
To construct the Income and Expenditure Account (I&E) from Receipts and Payment Account, follow the procedures below (R&P).
Step 1: Transfer all revenue expenditures obtained this accounting period from R&P’s Payments side to I&E’s Expenditure side.
Step 2: For the present accounting period, all revenue receipts are moved from the Receipts side of R&P to the Income side of I&E.
Step 3: In Step 1, add (adjust) outstanding expenditures for the present period and expenses paid ahead (prepaid expenses) for the present period in previous accounting periods to their respective expenses.
Step 4: In Step 2, income outstanding (accrued income) for this period and income received prior to for this period in previous accounting periods are added (adjusted) to their associated incomes.
Step 5: Adjust non-cash items like as depreciation and appreciation for this accounting period within the I&E.
Step 6: The Income and Expenditure sides are summed after correcting all revenue items for this accounting period.
The balancing figure is termed surplus if the accumulation of the Income side exceeds (or is a smaller amount than) the sum of the Expenditure side (or deficit).