What Is Income And Expenditure Account ?
An income and expenditure account is prepared by non-profit organizations to summarize the revenue and expenses over a specific period of time. It tracks and records all the incomes on credit side and expenses on the debit side. It is similar to profit and loss account which is prepared by business firms.
Features OF Income And Expenditure Account
The main features of income and expenditure account can be highlighted as follows:
1. No Opening And Closing Balance
Opening balance is not require to prepare income and expenditure account because it only records revenues and expenses for specific period.
2. Accrual Basis
Income and expenditure account is maintained on accrual basis. It means transactions are recorded when revenues or expenses are earned or incurred.
3. Based On Receipt And Payment Account
Income and expenditure account is prepared on the basis of receipt and payment account at the end of the accounting year.
4. Non-cash Items
This account records non-cash items also like depreciation.
5. Debit And Credit Rule
Income and expenditure account follows double entry bookkeeping system. Expenses and losses are debited and incomes are credited as it is a nominal account. It helps to determine surplus or deficit.
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6. No Capital Transactions
Only revenue items are included in income and expenditure account. So, capital items are excluded while preparing this account.
7. Only Current Year's Transactions
Income and expenditure account includes only current periods transactions.