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Income and expenditure account can be defined as an account that reveals surplus or deficit of a non-trading concern by matching incomes and expenses of a specified accounting period
Profit and loss account is a nominal account which is prepared for purposes of determining net profit or loss. Major source of revenue is from Sale of goods or services. The proceeds are distributed among the share holders This is usually for a business enterprise.
Incoem and expenditure account is a nominal account whichis preprared for purposes of calculating surplus or deficit for non profit organization. The surplus/deficit is added to the capital fund. Sources of income includes; donations subscriptions and grants
Income and expenditure accounts are preparing for a non-profit organization. Profit and losses accounts are preparing for business organizations. entity with the aim of making profit.
Both reveal the same whether the firm is running profitably or in loss, but usuage of both is differ based on the nature of the Organisation.
Like "Profitable" Organisation used to prepare Profit & Loss Account.
Ex: Manufacturing Concern, Retail Organisation etc
where as "Non Profitable Organisation" used to maintain Income & Expenditure, where minimum records are kept.
Ex: Hospital, School, Universities etc.
Income and expenditure account and profit and loss account both are prepared for finding net profit or net loss of organization. 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.
1. Income and expenditure account 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 organization or Business. Income and expenditure account is prepared by not -for profit organization 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 expenditure account 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.
1. It is a nominal account, prepared for the purpose of calculating surplus (excess of income over expenditure) or deficit (excess of expenditure over income) of non-profit organizations.
2. The major source of income is subscriptions, donations and grants.
3. The surplus or deficit is not distributed among the members of non-profit organizations; rather it is added to the capital fund.
4. Final accounts are prepared from Receipts and Payments Account and additional information.
1. It is nominal account, prepared for the purpose of calculating net profit or net loss of business enterprises.
2. The major source of income is the revenue received from sale of goods or rendering services by the business enterprise.
3. The net profit or net loss is distributed among the owners of business enterprises.
4. Final accounts are prepared from Trial Balance and additional information.
