income and expenditure account

What is Income and Expenditure Account?

Income and Expenditure Account is a nominal account. It is just like the Profit and Loss Account of a firm. Since non profit organisations are not formed from the motive of earning profit, they do not prepare any profit and loss account. But they also require to keep a check on their incomes and expenditure. Hence non-profit organisations form income and expenditure account to ascertain the results.

Incomes appear on the credit side of the account whereas expenditure appears on the debit side of the account. If the income side of the account is higher than the expenditure, this means surplus. However if the debit side is larger, this means the balance is deficit. Surplus is added to capital fund whereas deficit is deducted from capital fund.

Just like receipts and payments account, income and expenditure account is prepared at the end of the accounting period. This is prepare on the basis of accrual basis of accounting.

Following points to be taken consideration while preparing Income and Expenditure Account

  1. Revenue Expenditure for the accounting period is taken, whether they have been paid or not.
  2. Record revenue income for the accounting period whether it is received or not.
  3. It records non cash expenses as well such as depreciation.
  4. Does not record any capital expenditure.
  5. Do not record capital income or receipts such as life membership fee.
  6. Record only current year transactions. Exclude all previous or succeeding transactions.
  7. Only nominal account items are considered while preparing the account. Real and personal account items comes in Balance Sheet.

It should also be noted that there is no opening balance of Income and Expenditure Account. But there is closing balance which either shows surplus or deficit.

Features of Income and Expenditure Account

Features of Income and Expenditure Account are as follows –

  • Nature –  It is a nominal account . It records only revenue nature of expenses and losses.
  • Basis of Recording – This account records transactions on the basis of accrual basis of accounting.
  • Opening and Closing Balances – There is no opening balance. However there is closing balance which either shows surplus or deficit.
  • Period – It records only those transaction which belongs to the current accounting period.
  • Adjustments – This account takes into consideration prepaid expenses, outstanding expenses, etc.

Specimen of Income and Expenditure Account

Name of the organisation


for the period ended……

Expenditure Amount Income Amount
To Salaries

Add: Outstanding at the end

Less: Outstanding in the beginning

By Subscriptions
To Rent By Entrance Fees
To Insurance Premium By Donations
To Audit Fees By Sale of Old Newspapers
To Printing and Stationery By Hall Rent
To Honorarium By Sundry Receipts
To Telephone expenses By Deficit
To Repairs
To sports material used
To Depreciation on Building
To Surplus