Note on Income and Expenditure Account

  • Note
  • Things to remember

INTRODUCTION

Income and expenditure is a nominal account which includes all revenue items. It is prepared same as profit and loss account i.e. on accrual basis. The difference of this account will represent surplus or deficit.

Features of Income & Expenditure Account

The features of income and expenditure a/c are as follows:

  • It is a nominal account.
  • It includes all revenue items.
  • It includes accrued income or expenditure related to current year only.
  • The difference of this account is surplus or deficit.

Characteristics of Income and Expenditure Account

  • It is similar to Profit and Loss Account of a profit-seeking concern.
  • All expenses are recorded on debit side and all revenues on credit side of income and expenditure account.
  • It deals with only revenue transaction.
  • Surplus or deficit of a concern is ascertained through this account. Credit balance indicates surplus, while debit balance indicates deficit.
  • Its balance is transferred to Capital Fund Account.
  • It is prepared on the last day of an accounting year.
  • It does not need opening balance.

Method of Preparation

The following points are to be noted, while preparing the above account:

  1. Surplus or deficit of a fixed period of time is ascertained through this account. So, it's heading will be:

    Income and Expenditure Account for the year ended as on .............

  2. Income and Expenditure Account is a Nominal Account. Hence, only revenue (no capital) items will find place in it.

  3. All items of revenue income and expenditure relating to the current year will appear in it.

Format of Income and Expenditure Account

Income and Expenditure Account
For the year ending on……………………………

Expenditure

Dr.Amt

Income

Cr.Amt

Revenue Payment:
To Rent XX
Less: Outstanding for Previous year XX
Add: Outstanding for current year XX
Add: Advance for current year XX
Less: Advance for next year XX
To Salary
To Insurance
To Audit fee
To Honorarium
To Bank Charges
To Newspaper
To Loss on sale of fixed assets
To Upkeep of lawn
To Charity
To Advertisement
To Tournament expenses
To Surplus (Excess of income over expenditure)






XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX

XXX
XXX
XXX
XXX

Revenue Receipt:
By Subscription XX
Less: Outstanding for Previous year XX
Add: Outstanding for current year XX
Add: Advance received in previous for current year XX
Less: Advance received in current year for next yearXX
By Entrance fee
By Donation (General)

By Profit on sale of assets
By Proceeds from Tournament
By Interest receive
By Sundry recipt
By Government grants
By Sale of newspaper
By Proceeds from charity show
By Deficit (Excess of expenditure over income)








XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX

XXX

XXX

Distinguish between Receipt & Payment Account and Income & Expenditure Account

Basis

Receipt & Payment Account

Income & Expenditure Account

Account

It is a real account.

It is a nominal account.

Nature

It includes both revenue and capital item.

It includes only revenue items.

Basis

It is prepared on cash basis.

It is prepared on accrual basis.

Opening

It starts with opening balance and ends with closing balance of cash.

It has no opening and closing balance.

Period

It includes the actual cash receipt.

It includes only the income and expenditure of current year.

Adjustment

Adjustments are not considered.

Adjustments are considered,.

Points to be considered while converting receipt & payment account into income & expenditure account:

  1. Exclude opening and closing balance of cash.
  2. Exclude capital items.
  3. Exclude amount of income and expenditure related to the current year.
  4. Provide Accrued income and expenditure related to the current year.
  5. Provide depreciation if given.




References:

Sharma, Narendra et.al., Principles of Accounting-XI, Bundipuran Prakashan, Kathmandu

Koirala, Yadav Raj et.al., Principles of Accounting-XI, Asmita Books Publication, Kathmandu

Shrestha, Dasharaha et.al., Accountancy-XI, M.K. Prakashan, Kathmandu

Features of Income & Expenditure Account

  1. It is a nominal account.
  2. It includes all revenue items.
  3. It includes accrued income or expenditure related to current year only.
  4. The difference of this account is surplus or deficit.
.

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