Income and Expenditure Account

The account through which surplus or deficit of

a non-profit-seeking concern is ascertained, is called

Income and Expenditure Account

Characteristics of Income and Expenditure Account

Income and Expenditure Account is nominal account for

which the rule of debit and credit is debit all expenses and
losses and credit all income and gain.
All expenses are recorded on Debit side and all revenues on
Credit side.
Only revenue transactions are included in it. No capital items
is taken into account.
All the items of income/revenue concerning current year
whether received in cash or notand all items of expense
whether paid in cash or notare taken into account. But no
item of income or expense concerning last year or next year is
included in it.

Surplus or deficit of a concern is ascertained through

this account. Credit balance "indicates surplus, while

debit balance indicates deficit.
Its balance is transferred to Capital Fund Account.
It is prepared on the last day of an accounting year.
It does not start with any opening balance.

Difference between Income and Expenditure Account & Receipts

and Payment Account
Receipts and Payments
Account
1.
2.
3.

Income and Expenditure

Account

It is a summarized statement of all cash

transactions during an accounting year.
Only cash transactions are recorded here.
Transactionsboth capital and revenueare recorded here.

1.

2.

3.

It is the account of revenue income

and revenue expenditure of an
accounting year.
It is not confined to, cash transactions
only, i.e. non-cash transactions are
also included in it.
Only revenue transactions are
recorded here.

4. It is real Account in nature.

5. Transactions involving cash

receipts are recorded on Debit

side and those involving cash
payments are recorded on
Credit side.
6. It does not show income and
losses for the current year

Its balance can never be

credit.
8. Its balance is carried over to
Receipts & Payments Account
of the next year.
7.

4. It is Nominal Account in

nature.
5. All expenditures are recorded
on Debit side and all incomes
on Credit side.

6. Its. closing balance

represents either surplus or

deficit. Credit balance
indicates surplus, while debit
balance indicates deficit.
7. Its balance may be either
debit or credit.
8. Its balance is transferred to
Capital Fund.

9. This account shows opening

9. It has no opening balance.

balance except in the first year.

10. This account records

transactions relating to past,

present and future, years. Hence,
no adjustment is made for prereceived or accrued incomes and
pre-paid or outstanding
expenses. In a word, it is
prepared on cash basis.
11. Adjustments are not made in

Receipts and Payments account

10. Transactions relating to the

current year only are recorded in

it. Hence, adjustments are
invariably made for pre-received
or accrued incomes and pre-paid
or outstanding expenses. In a
word, it is prepared on Accrual
basis.
11. Adjustments are made in

Income and Expenditure

account