Income & Expenditure Account 📊
Definition: It is like the Profit & Loss Account of a trading concern. It is prepared to find out the Surplus or Deficit for the Current Year.
Nature: Nominal Account (Debit Expenses, Credit Incomes).
Features 🌟
- Basis: Accrual Basis. (Records income earned and expenses incurred, whether paid or not).
- Period: Records ONLY Current Year items. (Exclude Past/Future items).
- Capital vs Revenue: Records ONLY Revenue items. (Exclude Capital items like purchase of Building).
- Non-Cash Items: Records Depreciation, Bad Debts, Outstanding Expenses, etc.
- Result: Shows Surplus (Profit) or Deficit (Loss).
Comparison Table 🆚
| Feature | Receipts & Payments A/c | Income & Expenditure A/c |
|---|---|---|
| Nature | Real Account (Cash). | Nominal Account (P&L). |
| Basis | Cash Basis. | Accrual Basis. |
| Items | Capital & Revenue both. | Revenue items only. |
| Period | Past, Present, Future. | Current Year only. |
| Opening Bal | Yes (Cash Balance). | No Opening Balance. |
| Result | Closing Cash Balance. | Surplus or Deficit. |
The Adjustment Game
To convert Receipts (from R&P A/c) to Income (for I&E A/c): Income = Received during year + Outstanding at end - Outstanding at start - Received in Advance at end + Received in Advance at start.
Quiz Time! 🎯
Test Your Knowledge
Question 1 of 5
1. Income & Expenditure Account is a:
💡 Final Wisdom: "This is the 'Truth' account. It tells you if you are actually living within your means, ignoring the cash flow timing differences." ⚖️
Next up: Balance Sheet of NPO - The Financial Position! 🏛️