Evan Carmichael Top Header about About About facebook Twitter YouTube Google+

Steps to prepare income and expenditure account



Free PDF Download
Secret Reserves - By Anil Kumar Gupta

Name: Email:


1. Ignore opening and dosing cash and bank balances appearing in receipts and payments account.

2. Eliminate all items of capital receipts and payments.

3. Ascertain income of the relevant year by deducting from the total receipts the income received on account of previous and future years and by adding the income accrued due in the year but not received and income received in the previous year but relating to this year.

4. Ascertain expenditure of the relevant period by deducting expenditure both relating to preceding period and succeeding period from the total payments and by adding the expenditure outstanding at the end and expenditure prepaid in the beginning.

5. Make adjustments, as per additional information, such as depreciation, bad debts etc., if any.

6. The income and expenditure account, when balanced, will disclose surplus (if the credit side is bigger) or deficit (if the debit side is bigger). If surplus i.e. excess on income over expenditure add it to the capital or accumulated fund. However, if deficit i.e., excess of expenditure over income deduct it from the capital or accumulated fund.


Distinction between receipt and income

"Receipt" means total cash received during the current year. But "income" means total income earned for the current year.

The points of distinction between the two are stated below :-


Receipt

1. Any cash received in regarded as receipt.

2. It is not confined to any accounting year. In other words, it may include cash received for any year-past, present or future.

3. It may be of both capital and revenue nature.

4. In case of receipt, cash increases equal to amount of receipt.

5. An item can't be called "receipt" unless equivalent amount of cash received.

6. It is recorded on debit side of cash book.

7. It is not included in final accounts. In other words, it is not considered in determining the result of concern.


Income

1. Any cash received mayor may not be regarded as income. Cash received for current year is regarded only as income.

2. It is confined to current accounting year only.

3. It is of revenue nature only.

4. In case of income cash may not increase equal to the amount of income.

5. An item may be "income", even though cash has not been received.

6. It is credited to income and expenditure account.

7. It must be considered in final accounts.


Distinction between payment and expenditure

Payment means total cash paid during the current year. But expenditure means total expenses incurred for the current year only.

The points of distinction between the two, are as follows :-


Payments

1. Any cash paid in regarded as payments.

2. It is not confined to any accounting year, i.e. it may include cash paid for any year-past, present or future.

3. It may be of both capital and revenue nature.

4. In case of payment, cash decreases equal to amount of payment.

5. An item can't be called "payment" unless equivalent amount of cash is paid.

6. It is recorded on credit side of cash book, i.e. credited to cash account.

7. It is not included in final accounts. In other words, it is not considered in determining the result of concern.



Expenditure

1. Any cash paid mayor may not be regarded as expenditure.

2. It is confined to current accounting year only.

3. It is of revenue nature only.

4. Cash mayor may not decrease equal to the amount of expenditure.

5. An item may be "expenditure" even though cash has not been paid.

6. It is debited to income and expenditure account.

7. It must be considered in final accounts.


Related Articles

  Capital and Revenue
  The 11:10 Rule!
  Creating cash flow forecasts
  The Secret to Less Anxiety over Business Cash Flow
  Non Profit Organization Accounting
  FINANCIAL STATEMENTS FOR SMALL BUSINESS LOANS
  Preparation of Profit and Loss Account
  How much cash does your business generate?
  Rectification Of Accounting Errors
  Money Getting Tight? 5 Ways How To Control Your Cash Flow
  Debits and Credits in Accounting
  Revenue
  Balance Sheet and Profit and Loss Account
  MAKING MONEY WORK FOR YOU
  Are You Ready to Earn Cash by Taking Online Surveys?
  Why an Integrated Financial Accounts?
  How to Create a Windows Password Reset CD?
  Internet Income Opportunities - Pay Per Click
  Personal Expense Manager for a travelling businessman
  Reliable stash of savings

Home > Accounting > Anil Kumar Gupta > Steps to prepare income and expenditure account >

Free PDF Download
Secret Reserves - By Anil Kumar Gupta

Name: Email:

About the Author: Anil Kumar Gupta

RSS for Anil's articles - Visit Anil's website
Proprietor of HiTech Computer Services, Anil Kumar Gupta, Bachelor of Engineering (Hons.) in Electrical and Electronics Engineering from Birla Institute of Technology and Science, Pilani, India, Year of passing : May, 1985, is born on January 7, 1964 , Age : 40+, and is Indian national. Services Offered by HiTech Computer Services : Standard software for various business segments, Customized Software Development, Websites and web based ASP applications development, Financial Accounting and business management software, website hosting and promotion. HiTech Group Websites, Visit us at: www.hitech-on-web.com * www.accounts-on-web.com * www.e-trading.bz * www.accountingsoftware.bz * www.onlineaccounting.bz * www.websitedesign.bz * www.softwaredevelopment.bz * www.businesssoftware.tv * www.businessaccounting.in * www.freeaccounting.in * www.freeaccountingsoftware.org * www.freesoftware.US.com * www.accounting.EU.com * www.our-earth.net * www.CityAtLeisure.com
Click here to visit Anil's website.
Dashed Line

More from Anil Kumar Gupta
Non Profit Organization Accounting
Preparation of Profit and Loss Account
Reserves and Provisions
Single Entry Bookkeeping Accounting System
Distinction between provisions and reserves

Related Forum Posts

How To Replace Google Adsense? How To Replace Google Adsense?
Re: Will you budget your business in 2012? Re: Will you budget your business in 2012?
Re: Is Anyone Using Tweetdeck? Re: Is Anyone Using Tweetdeck?
Adsense question...Evan? Anybody? Adsense question...Evan? Anybody?
Re: What is your biggest challenge? Today? Re: What is your biggest challenge? Today?

Share this article. Fund someone's dream.

Share this post and you'll help support entrepreneurs in Africa through our partnership with Kiva. Over $50,000 raised and counting - Please keep sharing! Learn more.
Share for a Cause
Featured Expert
Canada Mortgage
@smibroker
Visit website



Worksheets
By: Evan Carmichael

8 Powerful Steps to Finding Your Passion

Do you have what it takes to be an entrepreneur?

Does your pitch suck?

Create a plan of attach to launch your new business.

8-Cover

Like this page? PLEASE +1 it! Evan Signature
Bottom Footer



Newsletter

Get advice & tips from famous business
owners, new articles by entrepreneur
experts, my latest website updates, &
special sneak peaks at what's to come!
Name:
Email:
Popular Articles

Getting The Media Attention You Deserve

Advertise without saying a word

Suggestions

Email us your ideas on how to make our
website more valuable! Thank you Sharon
from Toronto Salsa Lessons / Classes for
your suggestions to make the newsletter
look like the website and profile younger
entrepreneurs like Jennifer Lopez.