DEPARTMENT OF TECHNICAL EDUCATION

ANDHRA PRADESH
Name : N. USHA RANI
Designation : Lecturer
Branch : Commercial & Computer Practice
(CCP)
Institute : GPW/Guntur
Year/Sem : III Sem
Sub-Code : CCP-302
Subject : ACCOUNTANCY-II
Topic : Non-Trading Concerns
Duration : 50 minutes
Sub Topic : Features of Income & Expenditure a/c
Teaching Aids : PPT ANIMATIONS
CCP302.58 1
Objectives
On completion of this period, you would be
able to understand
Features of Income and Expenditure Account.

CCP302.58 2
Recap contd.

 In the non-trading concerns, Receipts and Payments

Account is prepared at the end of the financial year
 At the beginning of the Account, the opening Balances
are shown on debit side

CCP302.58 3
Recap contd.

 All Receipts are shown on debit side

 All payments are shown on credit side
 The balance on credit side is closing balance of cash
and bank

CCP302.58 4
• What is the meaning of Income?
• What is the source of income for your family?
• What is meant by Expenditure?
• Have you spent any expenses regularly ?
• List the different kinds of incomes and expenses
in non-trading concerns

CCP302.58 5
Features of Income and Expenditure Account:
It is a Nominal account
 Non-Trading concerns derive their income from
Subscriptions, Donations and Grants.
 Income and Expenditure account is similar to
Profit and Loss Account
 Prepared by the Non-Trading concerns in place of
Profit and Loss account.

CCP302.58 6
Features of Income and Expenditure Account:
If members of the Non-Trading concerns want to
know Excess of Income over Expenditure or vice
versa, it is prepared.
 Reveals correct Financial Position
 Income and expenditure Account only deals with
Revenue Receipts and Revenue payments.
 All Income appears on Credit side and all the
 Expenditure on Debit side

CCP302.58 7
 (Contd.,)
Features of Income and Expenditure Account
Prepared for the Current year or period, from the
Receipts & Payments Account.
 Covers all Revenue Expenses (Paid as well as
Payable) pertains to Current period
 Covers all Revenue Incomes (Received as well as
Receivable) pertains to Current period.

CCP302.58 8
 (Contd.,)
Features of Income and Expenditure Account
 Any Income or Expenditure of Previous or Future
period are not entered.
 Income received in Advance or relating to Previous year
will be excluded.

 Provision will be made for Accrued income i.e., Income

earned during the period and not received.

 Expenditure either of previous period or subsequent

period will be excluded.

CCP302.58 9
 (Contd.,)
Features of Income and Expenditure Account

 Provision will be made for Expenditure incurred

but not paid.
If the credit side is greater than debit side
 Difference between Income and Expenditure (Profit)
is called ‘Excess of income over Expenditure’.
 If the debit side is higher than credit side
 It is called ‘Excess of Expenditure over Income’.

CCP302.58 10
 (Contd.,)
Features of Income and Expenditure Account

 Such ‘Excess of Expenditure over Income ’ is not

transferred to Capital Account.

It is shown separately or transferred to Capital Fund account.

 This Account has No Opening and Closing Cash and

Bank balances

 Items of Depreciation, Bad debts etc., are brought into

Accounts.

CCP302.58 11
Balance Sheet

 Balance Sheet is prepared by the Non-Trading

concerns also.

 The Income and Expenditure Account is followed

by the Balance Sheet.

 Balance Sheet covers all items such as Property,

Assets, Capital fund etc.

CCP302.58 12
Capital Fund

 Also called as Accumulated Fund or Corpus Fund

is a General Fund.

 Similar to Capital account of Trading concerns.

 Non-Trading concerns do not have formal Capital like

Trading concerns.

CCP302.58 13
 Examples of Capital Fund:

 Excess of Income over Expenditure

 Capital Receipts

 Receipts that are capitalised.

 Above items are accumulated under “Capital Funds”

 Shown as Liability in Balance sheet.

CCP302.58 14
Summary

 All revenue expenditure are shown in Income and

Expenditure Account
 Previous year and next financial year expenses are
excluded
 Current year expenses payable are added to the
current year expenses and the same is to be shown
on liabilities side of Balance sheet

CCP302.58 15
Summary contd.
 All Revenue Incomes are shown on credit side of
Income and Expenditure Account
 Previous year and next financial year expenses are
excluded
 Current financial year incomes accured but not
received are added to the current year Incomes and
the same is to be shown on Asset side of Balance
sheet

CCP302.58 16
Summary contd.

 The excess of credit over debit is called “Excess of

Income over Expenditure” (Profit)
 The Excess of debit over credit is called “Excess of
Expenditure over Income” (Loss)

CCP302.58 17
 QUIZ

(1) Which one of the following is similar to P&L A/C

(a) Income and Expenditure a/c

(b) Receipts and Payments a/c

(e) Balance Sheet

(g) None of the above

CCP302.58 18
QUIZ CONTD.

(1) Income and Expenditure Account covers all

Revenue expenses (paid as well as payable).

(a) Correct

(c) Not correct

(e) Some what correct

(g) None of the above

CCP302.58 19
 QUIZ CONTD.

• Excess of Expenditure over Income in

Non-Trading Concerns transferred to

(a) Profit and Loss a/c

(c) Income and Expenditure a/c

(e) Capital Fund a/c

(g) Balance Sheet

CCP302.58 20
 Frequently Asked Questions

(1) Write the Features of Income and Expenditure

Account?

CCP302.58 21