Explain the basic features of Income and Expenditure Account and of Receipt and Payment Account.
Explain the basic features of Income and Expenditure Account and of Receipt and Payment Account.
The following are the basic features of Income and Expenditure Account:
(i) Nature: It is a nominal account. It is like profit and loss account.
(ii) Basis of Recording: It is prepared on the basis of cash transaction.
(iii) Capital Transactions: The transactions those are capital in nature are excluded from this account. Only revenue nature transactions are recorded in this account.
(iv) Similar to Profit and Loss Account: Income and Expenditure Account is smilar to the Profit and Loss Account the only difference is that profit and loss account is prepared for general organisation and income and expenditure account is prepared for Not-for-Profit organisations.
(v) Current Year Transactions: This account records only current year transactions Transactions related to previous year and future are excluded in the form of adjustments.
(vi) Adjustments: Various cash and non-cash items like. outstanding expenses, prepaid expenses, income received in advance, income due but not received. depreciation, bad debts. etc. are be recorded in this account.
(vii) Surplus or Deficit: The outcome of income and expenditure account comes in the form of surplus or defied. When income exceed over expenditure it reflects Surplus and when expenditure exceed over income it reflects deficit. The surplus balance is added to the capital fund in balance sheet and deficit balance is deducted from the capital fund in the balance sheet.
The following are the features of Receipts and Payments Account:
(i) Nature: it is a summary of cash book and prepared like one coumn cash book.
(ii) Nature of Transactions: It records transactions related to both revenue and capital nature.
(iii) Opening and Closing Balance: This account begins with the opening balance of cash in hand and cash at bank or overdraft
(iv) Purpose: It reveals the cash position of an organisation. It helps to ascertain the total amount receieved or paid during an accounting period.
The following are the basic features of Income and Expenditure Account:
(i) Nature: It is a nominal account. It is like profit and loss account.
(ii) Basis of Recording: It is prepared on the basis of cash transaction.
(iii) Capital Transactions: The transactions those are capital in nature are excluded from this account. Only revenue nature transactions are recorded in this account.
(iv) Similar to Profit and Loss Account: Income and Expenditure Account is smilar to the Profit and Loss Account the only difference is that profit and loss account is prepared for general organisation and income and expenditure account is prepared for Not-for-Profit organisations.
(v) Current Year Transactions: This account records only current year transactions Transactions related to previous year and future are excluded in the form of adjustments.
(vi) Adjustments: Various cash and non-cash items like. outstanding expenses, prepaid expenses, income received in advance, income due but not received. depreciation, bad debts. etc. are be recorded in this account.
(vii) Surplus or Deficit: The outcome of income and expenditure account comes in the form of surplus or defied. When income exceed over expenditure it reflects Surplus and when expenditure exceed over income it reflects deficit. The surplus balance is added to the capital fund in balance sheet and deficit balance is deducted from the capital fund in the balance sheet.
The following are the features of Receipts and Payments Account:
(i) Nature: it is a summary of cash book and prepared like one coumn cash book.
(ii) Nature of Transactions: It records transactions related to both revenue and capital nature.
(iii) Opening and Closing Balance: This account begins with the opening balance of cash in hand and cash at bank or overdraft
(iv) Purpose: It reveals the cash position of an organisation. It helps to ascertain the total amount receieved or paid during an accounting period.
