Introduction

In this article you will learn about " Income And Expenditure Account :- Its Meaning, Features And Format " in simple language so that you will be able to understand it. A Not- For-Profit Organisation is a legal entity which operates for the benefit of the society not for the benefit of owners. Profit earning is not the objective of the Not-For-Profit Organisation. NPO do not prepare Profit and Loss Account as they are not set up with a purpose to earn profit. Instead, they prepare Income and Expenditure Account at the end of the accounting period to determine surplus or deficit. Let us now understand the meaning of Income and Expenditure Account. 

Meaning Of Income and Expenditure Account

Income and Expenditure Account is the summary of income and expenditure for the current year. It records only the transactions of the current year. It is prepared with the help of Receipts and Payments Account along with additional information regarding expenses, incomes, depreciation etc. It is just like a Profit and Loss Account prepared on accrual system of accounting, means adjustments are made for prepaid expenses, outstanding expenses, accrued income and income received in advance. It records only revenue nature transactions means those transactions which happen on daily basis like salaries to the staff, insurance, entrance fee, general donations, rent received, etc. All the revenue items relating to current year are shown in this account, the expenses and losses are shown on the Debit (Expenditure) side and income and gains are shown on the Credit (Income) side of the account. Difference between the two sides is either surplus or deficit. 

Format Of Income and Expenditure Account



Features Of Income and Expenditure Account

1. Nature :- It is a Nominal Account. Hence, expenses and losses for the year are transferred to the debit side while incomes and gains for the year are transferred to the credit side of the Income and Expenditure Account. 

2. Basis Of Accounting :- It is prepared on accrual basis of accounting. 

3. Cash And Non-cash Items :- Both cash and non-cash expenses and incomes are accounted. 

4. Adjustments :- This account is prepared on accrual basis of accounting and this prepaid or outstanding expenses and incomes, provision for doubtful debts are adjusted. 

5. Accounting Period :- Those incomes and expenses which are relate to the current year are recorded. 

6. Opening And Closing Balances :- It doesn't have an opening balance. Its balance at the end is either surplus or deficit which is transferred to Capital Fund in the Balance Sheet. 

7. Nature Of Transactions :- only revenue nature transactions (recurring transactions) are recorded.