Meaning: The account which is prepared by non-trading concerns at the end of the year to know the result (Surplus or Deficit) of the institution, is known as Income-Expenditure Account.

Explanation:

On the debit side of this account, current year’s revenue expenses and on the credit side current year’s revenue incomes are recorded. The non-cash transactions like bad debts, provision for doubtful debts, depreciation, etc. are also recorded in this account. The main purpose to prepare this account is to know whether the expenses incurred during the relevant year or time period, are within the rules and regulations.

Points to be kept in mind while preparing the Income-Expenditure Account:

• Keep in mind the year for which the Income- Expenditure Account has to be prepared.
• On the debit side of the Income-Expenditure Account, the current year’s revenue expenses are recorded.
• On the credit side of the Income-Expenditure Account, the current year’s revenue incomes are recorded.
• If the total of the credit side of the Income- Expenditure Account is more, then the difference is recorded on the debit side as ‘Excess of income over expenses (profit).’
• If the total of the debit side of the Income- Expenditure Account is more then the difference is recorded on the credit side as ‘Excess of expenses over incomes (loss).’

Following particulars are not to be considered:

• The opening and closing balances of Receipts-Payments Account.
• All capital incomes and capital expenses.
• Last year’s revenue income received in current year.
• Revenue expenses of last year paid in current year.
• Revenue income received for the next year in the current year.
• Revenue expenses paid for the next year in the current year.

Following details to be considered (which are not shown in the receipts and payments accounts):

• Depreciation, bad-debts reserve, provision for taxation, etc.
• Current year’s outstanding income to be received and current year’s expenses to be paid.
• Current year’s revenue income which was received in the last year and current year’s revenue expenses which was paid in the last year.