Page 78 - VIRANSH COACHING CLASSES

2.3.1 Meaning of Income and Expenditure Account :
Meaning : Income and Expenditure Account is a summary of revenue incomes and revenue
expenses of a particular period. It is similar to Profit and Loss Account. It is a Nominal Account
‘Not for Profit’ concerns prepare Income and Expenditure Account. All Revenue expenses / Losses of
current year are debited and all Revenue Income / Gains of Current year are credited to this account.
Incomes : In Income and Expenditure Account only, revenue incomes or gains of the current
period are credited, eg. Subscriptions Received, Interest on Investments received, Sundry Receipts.
General Donations received Tuition fees Received etc. Incomes received for previous year or for
next 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.
On the other hand outstanding - incomes and pre -received incomes of current year are considered.

Expenditure : Only Revenue Expenses / Losses of current year are debited to this account.
Items of expenses of ‘Not for Profit’ concern may differ from concern to concern. Expenses Paid for
previous year or for the next year are not taken into account. However, all expenses pertaining to
current year, whether actually paid or not paid during the previous year or current year, are taken
into account. In other words outstanding expenses and prepaid expenses during previous year are
considered.
Income and Expenditure Account shows Surplus or Deficit of the concern. Excess of Income
over Expenditure is known as Surplus while excess of Expenditure over Income is known as Deficit.
If there is a surplus, it is added to the ‘Capital Fund’ and if there is a deficit, it is deducted from
‘Capital Fund’

2.3.2 Features of Income and Expenditure Account :
1) Income and Expenditure Account is a Nominal A/c.
2) This account records only revenue expenses and Income of current year only.
3) It is similar to Profit and Loss Account.
4) It is prepared to find out surplus (i.e. excess of Income are Expenditure) or Deficit i.e.
excess of Expenditure over Income.)
5) Income and Expenditure Account is always accompanied with Balance Sheet.
6) It has no Opening Balance.

7) Surplus or Deficit is transferred to Capital Fund.
8) It records all cash items as well as non cash items which are related to current period eg.
salaries paid, outstanding salary, Bad Debts, Depreciation on Fixed Assets etc.

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