Explain the terms surplus and deficit in an income and expenditure account
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The account through which surplus or deficit of a non-profit-seeking concern is ascertained, is called Income and Expenditure Account.
All the information necessary for preparation of this account will be available from ledger accounts. Its left-hand (i.e. Debit) side records all revenue expenditure, while the right-hand (i.e. Credit) side records all revenues relating to the current year. The balance of the account, if credit, indicates surplus, i.e. excess of income over expenditure. Conversely, the balance of the account, if debit, indicates deficit, i.e. excess of expenditure over income.
Characteristics:
The following are the characteristics of Income and Expenditure Account:
It is in fact like a Profit and Loss Account of a profit-seeking concern.
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 not—and all items of expense —whether paid in cash or not—are 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.
All the information necessary for preparation of this account will be available from ledger accounts. Its left-hand (i.e. Debit) side records all revenue expenditure, while the right-hand (i.e. Credit) side records all revenues relating to the current year. The balance of the account, if credit, indicates surplus, i.e. excess of income over expenditure. Conversely, the balance of the account, if debit, indicates deficit, i.e. excess of expenditure over income.
Characteristics:
The following are the characteristics of Income and Expenditure Account:
It is in fact like a Profit and Loss Account of a profit-seeking concern.
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 not—and all items of expense —whether paid in cash or not—are 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.
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