How to prepare Income and Expenditure Account and Differences between Receipt and Payment account and Income and Expenditure account

1. ACCOUNTING FOR NOT FOR
PROFIT ORGANISATION (3)

2. • It is the summary of income and expenditure for the
accounting year.
• It is just like a profit and loss account prepared on accrual
basis.
• All non-cash adjustments like depreciation,outstanding or
prepaid expenses & accrued or advance income, provision, etc.
need to be adjusted through this account.

3. • It does not take into consideration both
capital receipts & capital payments.
• Closing balance, if comes on debit side is
known as surplus & on credit side, deficit.

4. Steps in Preparation of Income &
Expenditure A/c
• Examin the Receipts & Payments Account
thoroughly.
• Exclude opening & closing balance of cash &
bank as they are not income.
• Exclude the capital receipts & capital payments
as these are shown in Balance sheet

5. Steps in Preparation of Income &
Expenditure A/c
• Consider only revenue receipts to be shown on income
side (credit side) of this account for the current year
whether received or not.
• Take all revenue expenses of current year on debit side of
this account whether paid or not.
• Non-Cash item like Deprecation, provisions profit / Loss
on sale of assets etc. should be taken into consideration.

6. FORMAT OF INCOME AND EXPENDITURE
ACCOUNT

7. Distinction Between Income and Expenditure Account
and Receipt and Payment Account
Basis of
distinction
Income and
Expenditure
Receipt and Payment A/c
Nature It is like profit and
loss A/c
It is the summary of the
cash book.
Period It records income and
expenditure of
revenue nature only.
It records incomes &
expenditures of revenue
as well as capital nature

8. Distinction Between Income and Expenditure Account
and Receipt and Payment Account
Basis of
distinction
Income and
Expenditure
Receipt and
Payment A/c
Debit side Debit side of this
account records
expenses and
losses
Debit side of this
account records
the receipts
Credit side Credit side of
this account
records income
and gains
Credit side
records the
payments

9. Distinction Between Income and Expenditure Account
and Receipt and Payment Account
Basis of
distinction
Income and
Expenditure
Receipt and Payment A/c
Depreciation Includes
Depreciation
Does not include
Depreciation
Opening
balance
There is no
opening Balance
Represents cash in hand
/cash at bank or
overdraft
Closing
Balance
Represents excess
of income over
expenditure or
vice versa
Represents cash in hand
at the end and bank
balance