Question

Why does a not-for-profit organization prepare an income and expenditure account instead of a profit and loss account?

Answer 1

Since a ‘Non-profit organization’ isn’t working to procure profit, it doesn’t need to show a Profit and Loss Account. However, for assessing the monetary outcomes (i.e., excess or shortage emerging from the activities of a non-benefit association), it prepares Income and Expenditure Account toward the year’s end.