Let us make in-depth study of the meaning and features of Income and Expenditure Account of Not-For-Profit organisations.
Meaning of Income and Expenditure Account:
Income and Expenditure Account is a nominal account and includes only those items which are revenue in nature. Items which are revenue in nature (nominal accounts) and pertaining to the present accounting period are recorded in this account. On the basis of accrual concept, revenue and expenditure should be recognized and shown in this account. Items of incomes and gains are shown on its credit side, known as ‘Income’ side and items of expenses and losses should be shown on its debit side known as ‘Expenditure’ side.
Generally Income and Expenditure Account is prepared from the information contained in the Receipts and Payments Account along with the additional information. Items appearing on the debit side of the Receipts and Payments Account, after making necessary adjustments related to prepaid and outstanding items, are to be recorded on the credit side of this account.
In this regard it is to be noted that receipts that pertain to the current accounting period and are revenue in nature should only be recorded in this account. Items appearing on the credit side of the Receipts and Payments Account, after making necessary adjustments related to prepaid and outstanding items, are to be recorded on the debit side of this account. In this regard, it is to be noted that payments that pertain to the current accounting period and are revenue in nature should only be recorded in this account.
Features of Income and Expenditure Account:
ADVERTISEMENTS:
The basic features of income and expenditure account are as under:
(i) It is a nominal account and summarizes all expenditures and incomes of a non-profit organization.
(ii) Based on accrual concept, all items of revenue and expenditure are matched and recorded in this account.
(iii) Incomes and expenditures of the current year are to be shown in this account.
ADVERTISEMENTS:
(iv) Items of capital in nature can not find place in this account. For example, furniture purchased, a receipt for a particular purpose received during the year etc.
(v) It does not have any opening balance. However, the closing balance is either surplus (if there is an excess of income over expenditure) or deficit (if there is an excess of expenditure over income).
A specimen of an Income and Expenditure Account is given below:
