While preparing an Income and Expenditure account, the following points are to be considered.
1. This account is prepared usually in “T” form taking revenue expenses on the debit side and the revenue incomes on the credit side.
2. It is also prepared in vertical form. Under this method, the total of revenue incomes are shown first, revenue expenses follow it. After this, the total of expenses is deducted from the total of the incomes for ascertaining the surplus or deficit.
3. It is prepared to nd out the current year’s surplus or deficit, it does not have any opening balance. Therefore, previous year’s surplus or deficit is not important.
4. This account takes only the revenue incomes and revenue expenses. Capital receipts and payments are not taken into account.
5. Since it is maintained under accrual basis, current year’s income and expenditures alone are shown.
6. Outstanding expenses, accrued incomes, prepaid expenses, income received in advance, depreciation, provision, etc. in the current year are to be suitably adjusted.
7. At the end of the accounting year the income and expenditure account is balanced and it reffects either a surplus or a deficit which is transferred to capital fund.
