Question

Income and Expendityre Account Sums​

Answer 1

Answer:

Preparation of Income and Expenditure Account

Include all items of revenue receipts and expenses, on the respective side of the account.

Ensure that no items of capital incomes and expenses are included in this account.

Also, adjustment for amounts prepaid and outstanding, with respect to each item will have to be made.

Answer 2

Answer:

Income and Expenditure Account

Income and Expenditure Account Format

The Income and Expenditure Account is a summary of all items of incomes and expenses which relate to the ongoing accounting year. It is prepared with the objective of finding out the surplus or deficit arising out of current incomes over current expenses. It is quite similar to the Trading and Profit and Loss Account of a trading concern and is prepared in an exact manner.

Income and Expenditure Account is prepared on an accrual basis. All incomes and expenses relating to the accounting year, whether they are actually received and paid or not, are taken into consideration. Expenditure is recorded on the debit side and income is recorded on the credit side. A distinction is made between capital and revenue items and only revenue items are included in this account.

Income and Expenditure Account is a nominal account. Therefore, the rule of nominal account (debit all expenses and losses and credit all incomes and gains) is followed while preparing it. While preparing the account, only items of revenue nature are recorded and all items of capital nature are ignored. For example, the profit earned or loss suffered on the sale of an asset will be recorded in it but the amount received from the sale of an asset will not be recorded in it.