Understanding Income and Expenditure Account for Non-Trading Organizations
Income and Expenditure Account is crucial for non-trading organizations to monitor revenues, expenses, and financial position. It helps in determining surplus or deficit, providing insights for strategic decisions, and fulfilling reporting requirements for investors and stakeholders. The account is prepared annually following the accrual basis of accounting and undergoes independent auditing for validation.
Download Presentation
Please find below an Image/Link to download the presentation.
The content on the website is provided AS IS for your information and personal use only. It may not be sold, licensed, or shared on other websites without obtaining consent from the author. Download presentation by click this link. If you encounter any issues during the download, it is possible that the publisher has removed the file from their server.
E N D
Presentation Transcript
WELCOME WELCOME Class: Class: B.Com B.Com Part Subject: Financial Accounting Subject: Financial Accounting Topic Topic Non Trading Organization Non Trading Organization (B. Income And Expenditure Account) (B. Income And Expenditure Account) Prepared By Dr. SHAHID IQBAL Guest Faculty Marwari College, Darbhanga Mobile no. and whatsup no. : 7004160257: shahidlnmu@gmail.Com Part- -1 1
Everyone knows that the Non-trading organizations prepare Receipts and Payments Account for recording cash and bank transactions. In order to record the Expenses and Incomes of the concern, the concept of Income and Expenditure Account came into existence. The Income and Expenditure Account is a summary of all items of incomes and expenses which relate to the ongoing accounting year. It is prepared with the objective of finding out the surplus or deficit arising out of current incomes over current expenses. It is quite similar to the Trading and Profit and Loss Account of a trading concern and is prepared in an exact manner. Meaning Of Income And Meaning Of Income And Expenditure Account: Expenditure Account:
a) Non-trading concerns prepare this account. b) It s nature similar to the Profit and Loss Account as made by the for- profit concerns. c) Though it is prepared at the end of the year, it does not mean that it shows a record of a whole year. d) It determines the surplus or deficit of income over expenditures e) The concern prepares this account by strictly following the Double Entry System. Characteristics Of Income Characteristics Of Income f) The surplus or deficit of this account is transferred to the capital fund account. And Expenditure Account: And Expenditure Account: g) Unlike the Receipts and Payments Account, it does not start with an opening balance and ends with a closing balance. h) It strictly follows the accrual basis of accounting. i) An independent auditor has to audit this account for the validation of the account.
1 1. . Revenue RevenueInformation Information One of the major advantage of this account that it helps the concern to know about its revenues. It gives the concern about their past records and the current trends. Moreover, it will provide the concern relevant information for their futuristic course of action. It tells them their major source of profits and their loopholes where they are spending a lot. It helps them to control the extravagant expenditure approach. Advantages Of Income And Advantages Of Income And 2. . Beneficial Beneficial for for the theInvestors Investors Expenditure Account: Expenditure Account: Investors are very much interested in the profits and losses of the concern. In the case of non-trading concerns, it is especially the government which is interested in the statements of the concern. It is because they provide the concern with many facilities in the form of subsidies and donations. They want to analyze the working and the position of the concern. It helps them to decide the number of futuristic grants and donations.
Nobody can deny the fact that whenever there are advantages, there are certain disadvantages too. In the case of the Income and Expenditure Account, there is only one major disadvantage. This disadvantage is Misinterpretation of Data . As we have seen above also that the concern is highly dependent on the government for various funds and facilities. Disadvantages Of Income Disadvantages Of Income And Expenditure And Expenditure The government is only interested to help only those concerns which are performing well. The wellness of the concern is visible by its statements. Account: Account: In order to show their competence, it is mostly seen that they end up doing window-dressing of their statements. This becomes a very major disadvantage of this account.
a) Include all items of receipts and expenditure, on the respective side of the account b) Avoid entering capital incomes and expenses c) Make adjustments of Prepaid and Outstanding expenses and incomes Steps To Prepare Steps To Prepare Income And Income And d) Further, items included in receipts and payment account, depreciation, provisions, and profit or loss on sale of assets will have to be included in this account Expenditure Account: Expenditure Account: e) Finally, after putting down all items of revenue and expenses, you ll get a balance. The resulting balance will reveal the surplus or deficit
Specimen Of Income Specimen Of Income And Expenditure And Expenditure Account: Account:
Balance Balanceof of account Receipt and payment account: The difference between receipts and the payments represents the balance of cash in hand or at bank or bank overdraft at the closing date. Income and expenditure account: The difference of Income and expenditure represents either surplus or deficit balance. account Outstanding Outstandingitems Receipt and payment account: It restricts itself to cash transactions only and does not take into account any outstanding Income or expenditure Income and expenditure account: It includes all incomes whether received or not and all expenses whether paid or not relating to the period under review. items Difference Between Receipt Difference Between Receipt &Payment Account and Income &Payment Account and Income & Expenditure Account: & Expenditure Account: Balance Balancesheet Receipt and payment account: A receipts and payments account need not necessarily be accompanied by a balance sheet. Income and expenditure account: An income and expenditure account must be accompanied by a balance sheet for the period concerned. sheet
Placing Placingof of items items Receipt and payment account: in receipt and payment account receipts are shown on the debit side and payments on the credit side. Income and expenditure account: If it is prepared in account form all revenue incomes appear on the credit side and expenditure on the debit side. Difference Between Receipt And Difference Between Receipt And Payment Account And Income Payment Account And Income Carrying Carryingof of balance balance And Expenditure Account: And Expenditure Account: Receipt and payment account: The balance of receipts and payments account is carried to the next period. Income and expenditure account: The balance of income and expenditure account is not carried to the next period but is added in or deducted from the accumulated debit side.
Thank you Thank you
