Question

What is income and expenditure account? Explain its main characteristics

Answer 1

Income and expenditure account is prepared by non-trading concern to reveal the surplus or deficit arising out of the operating activities during the accounting period. It is one of the final accounts of non-trading concern like the profit and loss account of trading concern. All the revenue incomes during the accounting period are shown on income side and all of the revenue expenses during the period are shown to debit (expenditure) side of income and expenditure account. The excess of credit side over the debit side or excess of income over expenditure is termed as surplus, where the excess of expenses over the revenue income is termed as deficit. The surplus or deficit of income over expenditure is transferred to capital fund. The surplus is added to capital fund and vice-verse. Income and expenditure account is prepared on the accrual basis.

Features Of Income And Expenditure Account

* Income and expenditure account is prepared on accrual basis.
* Income and expenditure account records all cash and non-cash expensesand income, which are revenue nature.
* Income and expenditure account is debited with the expenses and losses and credited with the incomes and gains.
* The closing balance of income and expenditure account either surplus or deficit is transferred to capital fund in the balance sheet.