Q.Income and Expenditure account is a :
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An Income and Expenditure Account is the not-for-profit organisation's equivalent of a Profit & Loss Account: a nominal account prepared on the accrual basis that records only revenue incomes and expenses of the current period, and whose balance is a surplus (excess of income over expenditure) or deficit rather than profit or loss.
Convert the cash-based Receipts & Payments Account into the accrual-based Income & Expenditure Account by removing all capital items and all items of other periods, then adjusting current-period incomes/expenses for outstanding and prepaid amounts.
How it differs from Receipts & Payments
- Receipts & Payments A/c = a summarised cash book: all cash received/paid, capital or revenue, current year or not.
- Income & Expenditure A/c = only revenue items of the current year on accrual basis; capital receipts (donations for building, legacies, sale of assets) and capital payments (buying assets) are excluded and go to the Balance Sheet.
Preparing it (the adjustments)
Start from receipts/payments and apply accrual adjustments:
| Adjustment | Treatment |
|---|---|
| Subscriptions received | + outstanding for this year, − received in advance, − last year's arrears now received |
| Expenses paid | + outstanding, − prepaid |
| Depreciation on assets | Debit (non-cash expense) |
| Bad debts / provisions | Debit |
The Income and Expenditure Account records incomes and expenses of a non-profit body, so by the classification of accounts it is a nominal account. …
The Income and Expenditure Account is a Nominal Account.
The Income and Expenditure Account is prepared by not-for-profit organisations (TN HSC Commerce) to record all revenue incomes and revenue expenses relating to the current period, ending in a surplus or deficit. Because it deals only with items of income and expense — not with persons or property — it falls under the class …
- CA Foundation 2025Set may-202520 marksQ.(a) The Receipts and Payments Account of ABC Club for the year ended March 31, 2025 was as follows : [12] (Figures are in '000)You are given the following additional information : (Figures are in '000)
Receipts Amount Payments Amount Cash in hand 150 Ground man's Fee 1,125 Balance at Bank as per Pass Book : Moving Machine 2,250 – Deposit Account 3,345 Ground Rent 375 – Current Account 900 Cost of Teas 375 Bank Interest 45 Fares 600 Donations and Subscriptions 3,900 Printing & Office Expenses 420 Receipts from teas 450 Repairs to Equipment 750 Contribution to fares 150 Honorarium to Secretary and Treasurer of 2024 600 Sale of Equipment 120 Balance at Bank as per Pass Book: Net proceeds of Variety Entertainment 1,170 – Deposit Account 4,635 Donation for forthcoming Tournament 1,500 – Current Account 225 Cash in hand 375 Total 11,730 Total 11,730 For the year ended March 31, 2025, the honorarium to the Secretary and Treasurer are to be increased by a total of ₹ 3,00,000. Prepare the Income and Expenditure Account and Balance Sheet for the period ending March 31, 2025.Particulars April 1, 2024 March 31, 2025 Subscription due 225 150 Amount due for printing, etc. 150 120 Cheques unpresented being payment for repairs 450 390 Estimated value of machinery and equipment 1,200 2,625 Interest not yet entered in the Pass book 30 Bonus to Ground man outstanding 450 (b) A, B and C are partners sharing profits and losses in the ratio of 2:2:1. Their Balance Sheet as on 31st March, 2024 is as follows : [8]The partners have agreed to take D as a partner w.e.f. 1st April, 2024 on the following terms :Liabilities Amount ₹ Assets Amount ₹ Trade Creditors 19,275 Land and Building 37,500 Outstanding Liabilities 2,250 Furniture 9,750 General Reserve 9,750 Closing Stock 17,625 Capital : Sundry Debtors 8,250 A 18,000 Cash and Bank balance 1,650 B 18,000 C 7,500 43,500 Total 74,775 Total 74,775 (i) D shall bring ₹ 7,500 towards his capital and required sum of goodwill.(ii) The value of stock should be increased by ₹ 3,750.(iii) Provision for bad and doubtful should be provided at 10% of the debtors.(iv) Furniture should be depreciated by 10%.(v) The value of Land and Buildings should be enhanced by 20%.(vi) The value of the goodwill is fixed at ₹ 22,500.(vii) General Reserve will be transferred to the Partners' Capital Accounts.(viii) The new profit-sharing ratio of A, B, C and D shall be 5 : 5 : 3 : 2.(ix) The outstanding liabilities include ₹1,500 due to R has been paid by A. Necessary entry was not made in the books. You are required to prepare :(1) Revaluation A/c(2) Capital Accounts of the Partners.(3) Balance sheet as at that 1st of April, 2024.›Reveal solutionSolution
Part (a): Convert ABC Club's Receipts & Payments A/c into an Income & Expenditure A/c and Balance Sheet, adjusting for accruals, depreciation (by estimated values) and unpresented cheques → Surplus ₹60; Balance Sheet ₹7,650.
Part (b): Admit D — prepare Revaluation A/c (profit ₹9,450), Partners' Capital A/cs and the new Balance Sheet (₹94,725).
(All figures below are in ₹ '000, exactly as given in the question.)
Part (a) — Income & Expenditure A/c and Balance Sheet (12 Marks)
Step 1 — Working notes (accrual adjustments)
(W1) Subscriptions & Donations (income):
3,900+150 (closing due)−225 (opening due)=3,825
(W2) Printing & Office expenses:
420+120 (closing due)−150 (opening due)=390
(W3) Bank interest: ₹45 received + ₹30 accrued (not yet in the pass book) = 75.
(W4) Honorarium: the ₹600 paid was for 2024 (a liability outstanding at the start of the year). This year's honorarium = previous 600 + increase 300 = 900, and it remains outstanding.
(W5) Ground man: fee 1,125 + outstanding bonus 450 = 1,575.
(W6) Depreciation on machinery & equipment (revaluation/estimated-value method):
Particulars ₹ Opening estimated value 1,200 Add: Mowing machine purchased 2,250 Less: Sale proceeds of equipment (120) Less: Closing estimated value (2,625) Depreciation (balancing figure) 705 (W7) Repairs (bank-reconciliation adjustment): the R&P shows ₹750, which is the amount of cheques cleared per the pass book. Cheques actually issued this year = 750 − 450 (last year's cheques cleared now) + 390 (this year's cheques still unpresented) = 690 → this is the repairs expense.
(W8) Cash-Book bank balances (Pass Book − unpresented cheques):
- Opening: (3,345 + 900) − 450 = 3,795
- Closing: (4,635 + 225) − 390 = 4,470
Step 2 — Opening Balance Sheet (1 April 2024) → the Capital Fund
Liabilities ₹ Assets ₹ Creditors for printing 150 Cash in hand 150 Honorarium outstanding (2024) 600 Bank — Deposit A/c 3,345 Capital Fund (bal. fig.) 4,620 Bank — Current A/c (900 − 450) 450 Subscription due 225 Machinery & equipment 1,200 Total 5,370 Total 5,370 Answer — Capital Fund on 1 April 2024 = ₹4,620.
Step 3 — Income & Expenditure Account for the year ended 31 March 2025
Expenditure ₹ Income ₹ To Ground man's fee (1,125 + 450) 1,575 By Subscriptions & Donations (W1) 3,825 To Ground rent 375 By Bank interest (W3) 75 To Cost of teas 375 By Receipts from teas 450 To Fares 600 By Contribution to fares 150 To Printing & office exp. (W2) 390 By Net proceeds of variety entertainment 1,170 To Repairs to equipment (W7) 690 To Honorarium (W4) 900 To Depreciation (W6) 705 To Surplus (excess of income over exp.) 60
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