Income and Expenditure Account

What is Income and Expenditure Account?

The income and expenditure account is prepared by the non-trading entities to determine surplus or deficit of income over expenditures for a particular time frame. The accumulated or accrual concept of accounting is rigidly pursued while preparing income and expenditure a/c of non-trading concerns. It is prepared as a portion of final accounts of non-trading entities and is equal to the profit and loss account outlined by for-profit business entities.

Features of Income and Expenditure Account

Below mentioned are the characteristic features of Income and Expenditure Account :

• Income and expenditure account presented by non-trading entities are much like the profit and loss a/c presented by trading entities.
• It is prepared by stringently following the fundamentals of the double-entry system of bookkeeping or accounting.
• It is always prepared during the end of the period which normally comprises of 1 year.
• It decides the surplus or deficit of income over expends of the non-trading entities for the particular year.
• The surplus or deficit from the income and expenditure account is moved to the capital fund a/c.
• The Income and expenditure account of only revenue nature are incorporated in this account. Any income and expenditure of capital nature are not comprehended.
• It is prepared by accountants chosen by the enterprise’s management and is audited by an independent auditor.
• It does not begin with the opening balance, and it follows back the incomes received and expenditures incurred by the non-trading entities during the financial year.
• The accumulated or accrual concept of accounting is rigidly pursued when it is prepared.

The above mentioned is the concept that is explained in detail about Income and Expenditure Account for the Class 12 students. To know more, stay tuned to BYJU’S.