Income and Expenditure Account is a summary of all the income and expenditure of a non-profit organization over a specific period of time, usually a year. It is similar to the Profit and Loss Account of a business organization. It is prepared at the end of the accounting period to ascertain the surplus or deficit of the organization.

Main features of Income and Expenditure Account:

1. Nature: It is a nominal account where all income and expenses of the current accounting period are recorded.

2. Basis: It is prepared on an accrual basis, i.e., it records all incomes and expenses of the year irrespective of whether they are received or paid.

3. Purpose: The main purpose of this account is to ascertain the surplus or deficit of the organization during the accounting period.

4. No Opening and Closing Stock: Unlike a trading account, there is no opening and closing stock in the income and expenditure account.

5. Capital Expenditure: Any expenditure which is of a non-recurring nature or which is intended to increase the earning capacity of the business is treated as capital expenditure and is not recorded in the income and expenditure account.

6. No Personal and Private Expenses: It does not record any personal or private expenses of the proprietors. It only records those expenses which are related to the organization.

7. No Drawings: It does not record any drawings by the proprietors.

8. No Capital Receipts and Payments: It does not record any capital receipts or payments.

9. No Provision for Depreciation: It does not make any provision for depreciation. Depreciation, if any, is treated as an expense and is debited to the account.

10. No Cash and Bank Balances: It does not show cash and bank balances as it is not a real account.

Question

Income and Expenditure Account is a summary of all the income and expenditure of a non-profit organization over a specific period of time, usually a year. It is similar to the Profit and Loss Account of a business organization. It is prepared at the end of the accounting period to ascertain the surplus or deficit of the organization.

Main features of Income and Expenditure Account:

1. Nature: It is a nominal account where all income and expenses of the current accounting period are recorded.

2. Basis: It is prepared on an accrual basis, i.e., it records all incomes and expenses of the year irrespective of whether they are received or paid.

3. Purpose: The main purpose of this account is to ascertain the surplus or deficit of the organization during the accounting period.

4. No Opening and Closing Stock: Unlike a trading account, there is no opening and closing stock in the income and expenditure account.

5. Capital Expenditure: Any expenditure which is of a non-recurring nature or which is intended to increase the earning capacity of the business is treated as capital expenditure and is not recorded in the income and expenditure account.

6. No Personal and Private Expenses: It does not record any personal or private expenses of the proprietors. It only records those expenses which are related to the organization.

7. No Drawings: It does not record any drawings by the proprietors.

8. No Capital Receipts and Payments: It does not record any capital receipts or payments.

9. No Provision for Depreciation: It does not make any provision for depreciation. Depreciation, if any, is treated as an expense and is debited to the account.

10. No Cash and Bank Balances: It does not show cash and bank balances as it is not a real account.

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