There are three kinds of financial statements: 1) Income and Expenditure Account, 2) Receipt and Payment Account and 3) Balance Sheet proper. All the three put together make up the audited statement of accounts called the “Balance Sheet.”
- Income and Expenditure Account:
We earn for our living and spend for our needs. This is what money is meant for. In the process, the money that comes in is known as “income” and the money that goes out, “expense.”
Income and expenses are to do with the revenue items only and not capital. Revenue items are those that deal with the daily operations and have only a short term effect, whereas capital items are those that deal with upgrading or acquiring fixed assets that will have lasting effect on the life of the organization. The total of the income and the total of the expenses will affect the net result, ending up with surplus or deficit. Salary received, rent received, fees received, interest received, etc., are examples of revenue income, while salary paid, rent paid, fees paid, travel expense, telephone expense, etc. are examples of revenue expenditure.
The Income and Expenditure account gives the total of all income received and expenses incurred during the term of the whole financial year (like a running video from the beginning to the end of the year), listed according to the account heads…
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