INCOME AND EXPENDITURE

ACCOUNT
This account is in the nature of revenue of account of non-profit organisations
which shows all revenue expenditures incurred and revenue incomes earned in
an accounting period. It is immaterial whether the payment has actually been
made or has actually been received because it is prepared on accrual basis of
accounting. Only revenue items are shown in this account. It is similar to Profit
and Loss Account and is prepared on the same lines. All expenses and losses of
a revenue nature are recorded on debit side and all incomes and gains of
revenue nature on credit side. The difference of the account will be called
‘surplus’, when incomes and gains exceed the expenses and losses. If the debit
side exceeds the credit side, it will be called ‘deficiency’ or ‘deficit’.

Features
(i) It is a nominal account.
(ii) It records all revenue losses and expenses on debit side and all revenue
incomes and gains on credit side.
(iii) It does not record those items of expenditure and income which do not
relate to the current period. Only current year incomes and expenses are
recorded in it.
(iv) It also records non cash items like depreciation, bad debts, expenses
payable and incomes receivable for the current accounting period.
(v) If credit side is higher than the debit side, the result is surplus. It is also
called as Excess of Income over Expenditure. Similarly, if expenditure
side is higher than income, the result is deficit, also called Excess of
Expenditure Over Income.