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Profit & loss acount records only those amounts which are truely our gains or loses like these amounts are free from all expenses and investments. All investment & expenses have been deducted from our income to record profit or loss accounts.
While income & expense accounts are those which records all inward and outward flow of cash which support our business, generated by either selling our porducts or services & incured during our business process.
Income & Expenditure is nominal account and prepared for the purpose of calculating surplus or deficit.The major scoure of incomes subscrpition, donation and grants.Profit & Loss Accounts is nominal accounts prepared for the purpose of calculating net profit or loss of business enterprises. The major scoure of income is revenue received from sale of goods and services by business enterprises.
Income &Exp account is prepare at tne end ofthe period to ascertain the surplus and deficit of the period when P&L is prepare to ascertain the profit and loss of the period.
Profit and loss account depending on relation between the sales value and operation cost. but the income and expenditure account is related to finance policies and procedures.
The profit and loss account is T-account that shows on the Debit side the incomes/sales and on credit side the expenditures the balance on this account is transferred to the owners equity.
Income and expenditure account is the account that is used by not for profit organisations or entities to determine either the surplus or deficit.
P& L is for the corporate ( profit based organization ) whereas Income & E is for Non profit organization (NGO) etc
Income and expenditure account and profit and loss account both are prepared for finding net profit or net loss of organisation. Both are showing all the revenue expenditures and incomes for the year. But there are some fundamental differences between both which we are explaining with following basis.
Basis of Difference
Income and Expenditure A/c
Profit and Loss A/c
1. Definition
Income and expenditureaccount is account which is prepared for finding the excess of income over expenditures or excess of expenditures over incomes.
Profit and loss account is the account which is prepared for finding net profit or net loss.
2. Not for Profit organisation or Business
Income and expenditureaccount is prepared by not -for profit organisation whose aim is not to earn money.
Profit and loss account is prepared by business whose aim is to earn money.
3. Basis of Preparation
Income and expenditureaccount is prepared on the basis of receipt and payment account and some other information
Profit and loss account is prepared on the basis of trial balance and some other information.
4. Balance of Account
When we compare debit and credit side of this account, balance will be surplus or deficit.
The balance of profit and loss account will be net profit or net loss.
profit and loss account it shows profit or loss for trading company
while income and expenditure it shows surplus or deficit for non rofit organization
