Q:

What is an income and expenditure account?

A:

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.

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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Related Questions

  • Q:

    What is an expenditure in accounting terms?

    A:

    In accounting, the word "expenditure" is used to indicate a cost that a company pays to acquire equipment or other assets. Expenditures can also reduce liabilities or be disbursed to owners. They can be considered a type of expense, but expenses and expenditures are listed differently on income statements. Expenditures usually span a period of more than one statement.

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  • Q:

    What is the difference between capital and revenue expenditure?

    A:

    A capital expenditure includes all costs incurred on the acquisition of a fixed asset along with subsequent expenditures that increase the asset's earning capacity, while revenue expenditure only includes costs that are aimed at maintaining fixed assets and not enhancing earning capacity. The distinction between capital expenditure and revenue expenditure is important because only capital expenditures are included in the cost of a fixed asset.

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  • Q:

    What is income from continuing operations?

    A:

    Income from continuing operations is ongoing earnings from normal business activity. It is what a company can expect from future earnings, such as if a company plans to continue to produce shoelaces and buttons but no longer zippers, earnings from the zippers is not calculated as income from continuing operations.

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  • Q:

    What is an imprest account?

    A:

    An imprest account is one that holds a fixed amount of money and is replenished after a certain period of time. A good example of an imprest account is a petty cash system that may be replenished on a daily, weekly or monthly basis.

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