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Meaning and Features of Income and Expenditure Account

Meaning:

The income and expenditure account is a summary of revenue incomes and revenue expenses of a particular period. It is like a profit and loss account. It is a nominal account ‘Not for Profit’ concerns prepare income and expenditure account.

All revenue income/gains of the current year are debited and all revenue income/gains of the current year are credited to this account.

Income:

In the 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 the previous year or for next year are not taken into this account.

However, all incomes pertaining to the current year whether received or not received during the past year for this year, are taken into account. On either hand outstanding – incomes and pre-received incomes of the current year are granted.

Meaning and Features of Income and Expenditure Account

Expenditure:

Only revenue expenses/losses of the current year are debited to this account. Items of expenses of ‘Not for profit’ concern to concern. Expenses paid for the previous year or for the next year are not taken into account. However, all expenses pertaining to the 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 the previous year are considered.

Income and expenditure accounts show the surplus or deficit of the concern. Excess of income over expenditure is known as surplus while the excess of expenditure over income is known as the deficit.

If there is a surplus, it is added to the ‘capital fund’ and if there is a deficit, it is deducted from the ‘capital fund’

Features of income and expenditure account:

  1. The income and expenditure account is a nominal account.
  2. This account records only revenue expenses and income of the current year only.
  3. It is similar to profit and loss accounts.
  4. The fourth feature of income and expenditure is prepared to find out surplus (i.e excess of income are expenditure) or Deficit i.e. excess of expenditure over income. )
  5. The fifth feature of the income and expenditure account is always accompanied by the balance sheet.
  6. It has no opening balance.
  7. The seventh feature of the income and expenditure surplus or deficit is transferred to the capital fund.
  8. The last feature of the Income and Expenditure Account is that it records all cash items as well as non-cash items which are related to the current period eg. salaries paid, outstanding salary, bad debts, depreciation on fixed assets, etc.
So, friends, these were the meaning and features of the Income and Expenditure Account and I hope you have understood them clearly. But still, if you see any need in this post, then please give your view in the comment box and help us to improve that deficiency, thanks.