Question

What steps are taken to prepare Income and Expenditure Account from a Receipt and Payment Account?

Answer 1

The following steps are taken for preparing Income and expenditure account from a receipts and payments account:

1. Exclude the opening and closing cash and bank balance
2. Exclude all capital payments and receipts as these are shown on the balance sheet
3. Exclude any income received for the previous period and any payment received in advance.
4. Similarly exclude the expenditures for the previous period and the coming period.
5. Include all the incomes that are related to the current period but which are yet to be received.
6. Include all expenditures for the current period which are not yet paid.
7. Provisions for bad debts and depreciation on fixed assets should be charged to the income and expenditure account.

Also read:

• Income and Expenditure Account Based on Trial Balance
• Income and Expenditure Account

• Classification of Receipts
• Receipt and Payment Account

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