Q:

What is an income and expenditure account?

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Quick Answer

An income and expenditure account is a record showing debits and credits for an organization within a particular time period. Income and expenditure accounts are also referred to as profit and loss accounts. Generally, these accounts are credited with debits and credits, whether paid or not. As a rule, transactions of a capital nature, such as payments for vehicles or sales of machinery, as well as donations from a will, should not be included in this account.

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What is an income and expenditure account?
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Full Answer

The difference between income and expenditure, whether surplus or deficiency, is transferred to a capital account. A capital account is record of money available for the daily operations of an organization. Income and expenditure accounts are popular with nonprofit organizations, such as clubs, hospitals, schools and charities. Donations, member subscriptions and entrance fees are among the items that appear on the income side of profit and loss accounts.

Items appearing on the expenditure side of the record include salaries, honorariums, rents, utility bills and car expenses. Data for generating an income and expenditure account comes from a receipt and payment account or from a trial balance. A trial balance is a record that shows the ending balance of a particular account at the close of a particular period.

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